From the mid-1970s until 2007, world markets have had to absorb roughly five significant spikes in the price of crude oil and petroleum products. Whether driven by disruptions in the physical supply of crude or refined fuels, or by uncertainties owing to international conflicts and instabilities, these price increases have consequences for the United States. Elevated petroleum prices affect the balance of trade and, owing to the relative inelasticity of demand for gasoline at prices less than $4.00 per gallon, siphon away disposable income that might be spent to support spending, investment, or savings. The origin of the U.S. Strategic Petroleum Reserve (SPR) stems from the 1973 Arab-Israeli War. In response to the United States' support for Israel, the Organization of Arab Exporting Countries (OAPEC) imposed an oil embargo on the United States, the Netherlands, and Canada, and reduced production. While some Arab crude did reach the United States, the price of imported crude oil rose from roughly $4/barrel (bbl) during the last quarter of 1973 to an average price of $12.50/bbl in 1974. While no amount of strategic stocks can insulate any oil-consuming nation from paying the market price for oil in a supply emergency, the availability of strategic stocks can help blunt the magnitude of the market's reaction to a crisis. One of the original perceptions of the value of a strategic stockpile was also that its very existence would discourage the use of oil as a political weapon. The embargo imposed by the Arab producers was intended to create a very discernible physical disruption. This explains, in part, why the genesis of the SPR was focused especially on deliberate and dramatic physical disruptions of oil flow, and on blunting the significant economic impacts of a shortage stemming from international events. In response to the experience of the embargo, Congress authorized the Strategic Petroleum Reserve in the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) to help prevent a repetition of the economic dislocation caused by the Arab oil embargo. In the event of an interruption, introduction into the market of oil from the Reserve was expected to help calm markets, mitigate sharp price spikes, and reduce the economic dislocation that had accompanied the 1973 disruption. In so doing, the Reserve would also buy time for the crisis to sort itself out or for diplomacy to seek some resolution before a potentially severe oil shortage escalated the crisis beyond diplomacy. The SPR was to contain enough crude oil to replace imports for 90 days, with a goal initially of 500 million barrels in storage. In May 1978, plans for a 750-million-barrel Reserve were implemented. The SPR is currently authorized for expansion to 1 billion barrels. The George W. Bush Administration was unsuccessful in persuading Congress to raise the authorized size further to 1.5 billion barrels. The program is managed by the Department of Energy (DOE). Physically, the SPR comprises five underground storage facilities, hollowed out from naturally occurring salt domes, located in Texas and Louisiana. The caverns were finished by injecting water and removing the brine. Similarly, oil is removed by displacing it with water injection. For this reason, crude stored in the SPR remains undisturbed, except in the event of a sale or exchange. Multiple injections of water, over time, will compromise the structural integrity of the caverns. By 2005, the capacity of the SPR reached 727 million barrels. Its inventory reached nearly 700 million barrels before Hurricanes Katrina and Rita in 2005. Following the storms, some crude was loaned to refiners and some was sold. Loans of SPR oil are "paid" by the return of larger amounts of oil than were borrowed. By the end of 2009, was virtually filled to its capacity at 726 million barrels of crude oil. SPR oil is sold competitively. A Notice of Sale is issued, including the volume, characteristics, and location of the petroleum for sale; delivery dates and procedures for submitting offers; as well as measures for assuring performance and financial responsibility. Bids are reviewed by DOE and awards offered. The Department of Energy estimates that oil could enter the market roughly two weeks after the appearance of a notice of sale. The SPR could be drawn down initially at a rate of roughly 4.4 mbd for up to 90 days; thereafter, the rate would begin to decline. Although fears were expressed periodically during the 1980s about whether the facilities for withdrawing oil from the Reserve were in proper readiness, the absence of problems during the first real drawdown in early 1991 (the Persian Gulf War) appeared to allay much of that concern. However, some SPR facilities and infrastructure were beginning to reach the end of their operational life. A Life Extension Program, initiated in 1993, upgraded or replaced all major systems to ensure the SPR's readiness to 2025. The Arab oil embargo also fostered the establishment of the International Energy Agency (IEA) to develop plans and measures for emergency responses to energy crises. Strategic stocks are one of the policies included in the agency's International Energy Program (IEP). Signatories to the IEA are committed to maintaining emergency reserves representing 90 days of net imports, developing programs for demand restraint in the event of emergencies, and agreeing to participate in allocation of oil deliveries among the signatory nations to balance a shortage among IEA members. The calculation of net imports for measuring compliance with the IEA requirement includes private stocks. By that measure, the United States has more than 100 days' cushion. However, it is likely that less than 20% of the privately held stocks would technically be available in an emergency, because most of that inventory supports movement of product through the delivery infrastructure. At full capacity, the SPR might afford the United States roughly 70 days or more of net import protection, depending upon the pace of recovery of the domestic economy. These measures of days' protection assume a total cessation of oil supply to importing nations, a scenario that is highly unlikely. This would be especially true for the United States, given that Canada is currently the nation's principal source for crude oil. Some IEA member nations require a level of stocks to be held by the private sector or by both the public and private sectors. Including the U.S. SPR, roughly two-thirds of IEA stocks are held by the oil industry, whereas one-third is held by governments and supervisory agencies. The Energy Policy Act of 2005 (EPACT) requires, "as expeditiously as practicable," expansion of the SPR to its authorized maximum of 1 billion barrels. Advocates for expansion argue that the SPR will need to be larger if the United States is to be able to maintain stocks equivalent to 90 days of net imports. Congress approved $25 million in the FY2008 budget for expansion activities. A site in Richton, MS, has been evaluated for the addition of 160 million barrels of capacity. The FY2010 budget, at $229 million, includes $43.5 million for purchase of a cavern at Bayou Choctaw to replace a cavern posing environmental risks, as well as $25 million for expansion activities. However, it is not apparent that expansion remains a high priority. The conferees accepted language in the Senate version of the bill that prohibits SPR appropriations expended to anyone engaged in providing refined products to Iran or contributing in any way to expansion of refining capacity in Iran. Firms providing, or insuring tankers carrying, refined product to Iran would also be included in the prohibition. The Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) authorized drawdown of the Reserve upon a finding by the President that there is a "severe energy supply interruption." This was deemed by the statute to exist if three conditions were joined: If "(a) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration; (b) a severe increase in the price of petroleum products has resulted from such emergency situation; and (c) such price increase is likely to cause a major adverse impact on the national economy." Congress enacted additional drawdown authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383 ) after the Exxon Valdez oil spill, which interrupted the shipment of Alaskan oil, triggering spot shortages and price increases. The intention was to provide for an SPR drawdown under a less rigorous finding than that mandated by EPCA. This section, 42 U.S.C. § 6241(h), has allowed the President to use the SPR for a short period without having to declare the existence of a "severe energy supply interruption" or the need to meet obligations of the United States under the international energy program. As noted previously, the Energy Policy Act of 2005 made the SPR authorities permanent. These authorities also provided for U.S. participation in emergency-sharing activities of the International Energy Agency without risking violation of antitrust law and regulation. Under the additional authorities authorized in P.L. 101-383 , a drawdown may be initiated in the event of a circumstance that "constitutes, or is likely to become, a domestic or international energy supply shortage of significant scope or duration" and where "action taken ... would assist directly and significantly in preventing or reducing the adverse impact of such shortage." This authority allows for a limited use of the SPR. No more than 30 million barrels may be sold over a maximum period of 60 days, and this limited authority may not be exercised at all if the level of the SPR is below 500 million barrels. This was the authority behind the Bush Administration's offer of 30 million barrels of SPR oil on September 2, 2005, which was part of the coordinated drawdown called for by the International Energy Agency. The same authority may have been the model for a swap ordered by President Clinton on September 22, 2000. Legislation has been reported in the Senate that would alter significantly the authorities governing drawdown and sale from the SPR.