If the United States hadn’t spent the past decade-plus working toward energy independence, Americans might be facing an imminent energy catastrophe.
Or at least, something similar to a reboot of the gas lines — and gas prices — of the early 1970s.
The good news, that’s not likely to happen, because even though half the world’s oil supply is currently offline due to the recent attack on Saudi Arabia’s Abqaiq oil plant, America imports hardly any of that supply.
The United States now produces enough oil domestically to meet its own needs — and is very close to being a net exporter of oil.
Gas prices have gone up a couple of cents at the pump — and retail gasoline futures are trading about 20 percent higher on the New York Mercantile — but unless something else happens, most analysts predict no more than a temporary uptick of 15-30 cents over the next week or so.
Refineries are also in the process of changing over to “winter gas,” which generally costs about 5-10 cents less per gallon than the summer formulation and ought to serve a mitigating factor. Before the attack on the Saudi Aramco Abqaiq facility, analysts were predicting that the price of a gallon of unleaded regular would fall to $2 or even less in some states — lows not seen since the mid-2000s.
However, Americans can expect to pay more for other things because of world oil shortages, especially in Asia, which depends heavily on Saudi oil.
Things made there — and shipped here — are going to cost more, at least for the short term.
Foreign carriers — tankers, cargo ships — depend on Saudi oil, of which there is now a great deal less, for as long as the Abqaiq plant remains offline. This will drive up the cost of manufacturing and shipping goods worldwide.
Americans might be more shocked by the prices at their department store next week than at their local gas station this week.
There is also a separate problem — one that has nothing to do with the supply of oil but with the storage of the oil — that will probably come into focus over the coming weeks that has to do with the nation’s Strategic Petroleum Reserve.
The reserve was authorized in 1975 as part of the Energy Policy and Conservation Act. The idea was to have a ready backup supply on-hand domestically that could be tapped into to stabilize the available supply when disruptions occurred and thereby avoid over-reactive price spikes triggered by fears about potential shortages.
On Tuesday, President Trump authorized the release of oil from the reserves in the event it becomes necessary “... in a to-be-determined amount sufficient to keep the markets well-supplied.” The president also said in a tweet Sunday that (he has) “informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States.”
But the facilities built to store the oil were designed to last only 25 years, and they are not in good condition after almost twice as many years, according to the American Association of Petroleum Geologists.
The oil in the Strategic Reserves — roughly, 727 million barrels — was literally poured into old salt caverns, not into bunkers specifically designed for the purpose.
According to the AAPG, the structural integrity of these natural caverns has been compromised over the past several decades by a combination of natural geologic stresses as well as the pressure variations that they’re subjected to as oil has been added then withdrawn from them, which has been done about 14 times over the last 20 years.
The process of removing oil from the reserves involves injecting water or brine into one of the storage caverns, which forces the oil up. But changes in the pressure inside the caverns is causing “deformations” of the walls, according to AAPG’s Barbara Kutchko. She also writes about the possibility of “massive falls” of overhanging salt formations caused by the pressure fluxes, which could cause extensive damage to the steel tubes and piping used to draw the oil out of the caverns.
If damaged, the oil won’t flow — and the oil in the Strategic Reserves would be as offline as the oil in Saudi Arabia. And if that happens, Americans might be paying more than a 15-30 cents extra for a gallon of gas.
Eric Peters has been covering transportation and regulatory issues for the last 25 years. He wrote this for InsideSources.com.