Informing SPR Policy through Oil Futures and Inventory Dynamics
New analysis provides guidance and insight on the impacts of using the Strategic Petroleum Reserve (SPR).
- Examining the relationship between spot and future oil prices can better guide decisions about how and when to use the Strategic Petroleum Reserve (SPR) than the traditional “counting barrels” approach.
- We statistically estimate the relationship among oil prices, price spreads, and oil inventories to analyze the potential impact of SPR releases on oil markets.
- An SPR release of 10 million barrels could temporarily reduce oil prices by 2–3 percent and mitigate backwardation (when the price of oil delivered in the future is lower than the price delivered today) by 0.8 percentage points.
- Historical simulations suggest that SPR releases in 1991 and 2011 led to oil prices about 15–20 percent lower for a time and avoided about 5 percentage points of backwardation, compared to a no-release counterfactual.
Richard G. Newell
Dr. Richard G. Newell is the President and CEO of Resources for the Future. From 2009 to 2011, he served as the administrator of the US Energy Information Administration, the agency responsible for official US government energy statistics and analysis.
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