In wake of the 2022 midterm elections in the US, the Biden administration is considering tapping the US Strategic Petroleum Reserve (SPR) to check rising oil prices.
GS-III: Industry and Infrastructure (Sources of Energy), GS-III: Indian Economy (Foreign Trade and Growth and Development of Indian Economy)
Dimensions of the Article:
- Strategic Petroleum Reserves (SPR)
- The Need of SPRs in India
- Strategic Petroleum Reserves in India
Strategic Petroleum Reserves (SPR)
- The Strategic Petroleum Reserve (SPR) is an emergency stockpile of petroleum maintained by the United States Department of Energy (DOE).
- It is the largest known emergency supply in the world which was started in 1975 after oil supplies were interrupted during the 1973–1974 oil embargo, to mitigate future supply disruptions.
- In the basic sense Strategic petroleum reserves are huge stockpiles of crude oil to deal with any crude oil-related crisis like the risk of supply disruption from natural disasters, war or other calamities (thus moderating prices).
- According to the agreement on an International Energy Programme (I.E.P.), each International Energy Agency (IEA) country has an obligation to hold emergency oil stocks equivalent to at least 90 days of net oil imports.
- In case of a severe oil supply disruption, IEA members may decide to release these stocks to the market as part of a collective action.
- 3 Biggest ‘Strategic Petroleum Reserves’ are with Japan, US, China.
The Need of SPRs in India
- The current capacity of this is not sufficient to tackle any unpredicted event that occurs in the international crude market.
- 86% of the country is dependent on oil with nearly 5 million barrels of oil consumption in a day.
- The fluctuation in the price of crude oil in the international market leads to a dire need for India to make petroleum reserves to ensure the country’s energy security and avoid monetary loss.
Strategic Petroleum Reserves in India
- The construction of the Strategic Crude Oil Storage facilities in India is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL). ISPRL is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.
- Strategic crude oil storages are at Mangalore (Karnataka), Visakhapatnam (Andhra Pradesh) and Padur (Karnataka) as per Phase I. They have fuel storage of total 5. 33 MMT (Million Metric Tonnes).
- The government of India is planning to set up two more such caverns at Chandikhol (Odisha) and Udupi (Karnataka) as per phase II through Public-Private Partnership. This will give an additional 6.5 million tons of the oil reserves.
- After the new facilities get functional, a total of 22 days (10+12) of oil consumption will be made available.
- With the strategic facilities, Indian refiners also maintain crude oil storage (industrial stock) of 65 days.
- Thus, approximately a total of 87 days (22 by strategic reserves + 65 by Indian refiners) of oil consumption will be made available in India after completion of Phase II of the SPR programme. This will be very close to the 90 days mandate by the IEA.
- India became an associate member of the IEA in 2017 and recently, IEA has invited India to become a full-time member.
-Source: Indian Express