Thursday, February 29

If Spain wants to lower the price of oil, it already knows what it has to do: release its strategic reserves

In a historic decision, the United States announced that it will release 180 million barrels of oil from its strategic reserves over the next six months. This is more than double the total strategic oil reserve of Spain. How is this oil obtained and where is it stored? How much do we have? This is how the strategic reserves that our country has been maintaining since 1927 work.

Spain has oil for three months. By joining the International Energy Agency in 1974, Spain undertook to maintain a minimum level of oil stocks to deal with possible supply crises such as the current one. Specifically, Spain must maintain a minimum of 92-day reserves.

However, the usual thing is that the different countries usually maintain a higher level. According to IEA data, at the end of 2021 we had about 116 days left. Somewhat below our neighbors like France with 131 days, Italy with 141 days or Germany with 130 days. From 2000 to 2009, Spain’s reserves gradually increased, but since the outbreak of the economic crisis they stabilized.

These figures are well below the main producers, such as Canada, Saudi Arabia or Venezuela, with reserves that exceed 150,000 million barrels.


Where does the oil in these reserves come from?. According to the Central Entity for the Storage of Petroleum Products (Cores), an oil deposit was discovered in Spain in 1964 in Ayoluengo (Burgos) and later in the Mediterranean, the Gulf of Valencia, the Cantabrian Sea, the Guadalquivir valley and in the Gulf of Cadiz. Before the pandemic, annual production was 40,000 tons of oil. A really small amount, equivalent to a degree of self-sufficiency of 0.07%. Unlike other countries, Spain has a very low level of oil production.

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The supply is divided between the obligations by the Cores and another by the industry itself. Since 2013, the national body must guarantee reserves for 42 days, while the industry must guarantee the remaining 50 days.

Where are these strategic reserves stored?. The oil is stored in large fuel tanks, almost 30 meters high and with a capacity of about 240,000 cubic meters. Cores is the body that is in control and depends on the Ministry for the Ecological Transition. These tanks are divided throughout Spain, between five zones: North, Levante, Central Zone, South Zone and Canary Islands.

49.5% of the reserves are located in the Levante area, 15.2% in the north, 16.7% in the center, 14.1% in the south and 4.5% in the Canary Islands. %. As for its state, 55.1% are diesel, 31% crude and the rest are gasoline, fuel oil and kerosene, according to official data.

As a result of the Ukraine War, Spain has been approved to release 2 million barrels of oil. Last March, the International Energy Agency approved that the 31 member countries release a total of 60 million oil from their emergency reserves, equivalent to 4% of the total reserves or a third of what was announced by the US. .

In the case of Spain, this represents a total of 2 million barrels, equivalent to reserves for 2.6 days. It is an “unusual and voluntary” measure, as described by the Prime Minister, Pedro Sánchez. This has caused that the current reserves of Spain are not 92 days, but 89.4 days.

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How many known oil reserves does each country in the world have?  This map explains it.

These strategic reserves are released to try to stop the escalation of prices. On April 1, the IEA Council announced that it had approved a new release. It is the fifth time in history that it is approved to release part of the reserves. The previous ones were in 1991, 2005, 2011 and the commented one of March 2022.

Both the IEA and the United States release these reserves so that there is more supply and thereby try to lower the price of oil, close to historical highs. The release is usually short because if it goes too low, it could make people think that the reserves are insufficient and cause a panic in the market.

Hunger for today, bread for tomorrow? In the background is the idea that this situation with oil is highly conditioned by the current crisis and that in the future there will be the possibility of increasing reserves again. The United States has released a historic number of barrels, which it will sell now at a good price and with the hope of being able to replenish its reserves later, when prices have calmed down.

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