Does drawing down the U.S. strategic petroleum reserve help stabilize oil prices?

  • We study the effects of releases from the U.S. Strategic Petroleum Reserve (SPR) within the context of fully specified models of the global oil market that explicitly allow for storage demand as well as unanticipated changes in the SPR. We show that historically SPR policy interventions, defined as sequences of exogenous SPR shocks during selected periods, have helped stabilize the price of oil. Their effect on the price of oil, however, has been modest. For example, the cumulative effect of the SPR releases after the invasion of Kuwait in 1990 was a reduction of $2/barrel in the real price of oil after 7 months. Whereas emergency drawdowns tend to lower the real price of oil, we find that exchanges tend to raise the real price of oil in the long run. We also provide a detailed analysis of the benefits of the 2018 White House proposal to sell off half of the SPR within the next decade. We show that the expected fiscal benefits of this plan are somewhat higher than the revenue of $16.6 billion dollars projected by the White House.

Download full text files

Export metadata

Additional Services

Share in Twitter Search Google Scholar
Metadaten
Author:Lutz KilianGND, Xiaoqing Zhou
URN:urn:nbn:de:hebis:30:3-558277
URL:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3731017
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 647
Series (Serial Number):CFS working paper series (647)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2020
Year of first Publication:2020
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2020/12/08
Tag:SPR; crude oil; expectations; fiscal policy; oil inventories; policy intervention; storage
Issue:January 28, 2019. This version: May 13, 2020
Page Number:42
HeBIS-PPN:474400158
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht