The SPR Fiasco


If as a result of COVID-19 and declining worldwide oil demand "American-made crude oil" exports get whacked say by 2MM BOPD, that oil could be used to fill the SPR to the top, another 77MM barrels will do it (EIA,DOE). It will then take the mighty US shale oil industry 39 days to accomplish that.


Filling the SPR will cost the American taxpayer $2.7 billion dollars. I think the quality of the light tight oil being dumped into the SPR is not optimal, but that hardly seems to matter... the US shale oil industry needs help.


At a $35 WTI per barrel sale price the US shale oil sector will realize $650,000,000 of net revenue from filling the SPR, after all costs, taxes and royalty associated with extraction are paid.


Current public and private long term shale oil debt accrued over the past eleven years is estimated to still be over $300 billion; at a weighted interest rate of 6.25% over all loans (junk, first, second and mezzanine liens), the US shale oil industry pays about $19 billion a year in interest...so this grand scheme of helping the shale oil sector by filling the SPR will allow it to pay interest on that long term debt for....12 days.