Stockpiles play a large role in energy security and the overall price of petroleum products. Large stockpiles tend to result in lower prices as excess supply relative to demand provides a buffer against system shocks. Conversely, low stock levels mean that even small disruptions to supply can have significant market consequences, placing upward pressure on petroleum prices. Consequently, having large storage nodes in the distribution network is a critical component of our energy infrastructure.
The most well known petroleum stockpile is the 727 million barrel U.S. Strategic Petroleum Reserve (SPR). Founded following the 1973-74 oil embargo, the SPR provides a key safety valve in case of a major supply disruption which threatens the American economy. The SPR is also a national security safety net, providing a national defense fuel reserve. Additionally, the SPR allows the U.S. to meet its obligations under the International Energy Program which requires the U.S. to maintain at a minimum a 90 day stockpile of petroleum imports.
In an effort to ensure adequate emergency supplies, the Energy Policy Act of 2005 directed the expansion of SPR capacity to 1 billion barrels. Thus far, the Department of Energy has completed an Environmental Impact Statement (EIS) and a Record of Decision to select the sites for expansion. The EIS and the expansion policy is currently being reviewed by the Obama Administration.
In the commercial realm, arguably the most important trading hub for petroleum storage in North America is in Cushing, Oklahoma. Cushing is a major hub of pipelines and storage tanks connecting Gulf Coast and Canadian oil production and tanker deliveries with customers in the rest of the United States. Difficulty in moving product out of the trading hub, however, has led to a supply glut at Cushing throughout much of 2011. Several projects have been proposed to open up pipeline deliveries of crude to Texas and Louisiana refineries. Cushing is also noteworthy as the price settlement point for West Texas Intermediate Crude Oil on the New York Mercantile Exchange.
After initial shipment via pipeline, gasoline and other petroleum products are typically held in bulk
storage terminals that often service many companies before being sent to smaller holding areas for individual distribution. Michigan has 37 such terminals for the storage of crude oil and refined petroleum products.
Similar to the storage of natural gas, Michigan is a regional supply center with an ability to store large volumes of propane in underground rock formations and caverns. Above ground storage is also utilized and is distributed among a variety of propane wholesalers and marketers. Tank sizes range from approximately 9,000 to 30,000 gallons. During the winter months supply is drawn almost entirely from storage with imports used only to moderate weather and price fluctuations.
After shipment through the pipeline to a local bulk storage terminal, gasoline and other petroleum products are typically held in bulk containers that service many companies. At these terminals, the gasoline is loaded into tanker trucks destined for individual retail gas stations. The tanks in these trucks, which can typically hold up to 10,000 gallons, usually have several compartments, enabling them to transport different grades of gasoline or petroleum products. The truck tank is where special additive packages from gasoline retailers get blended into the gasoline to differentiate one blend from another. In some areas, ethanol may be “splash blended” in the tanker to meet environmental requirements. When the tanker truck reaches a gas station, the truck operator unloads each grade of gasoline into the appropriate underground tanks at the station. In 2008, there were 4,890 fueling stations dispensing gasoline in the State.
Propane is primarily transported by truck to end users by dealers who come to the distributor’s bulk plant to fill up their small tank trucks. These tank trucks, called “bobtails,” deliver propane to large storage tanks that are outside homes. The average residential propane tank holds between 500 and 1,000 gallons of liquid fuel, and is refilled several times a year. Personal canisters for recreational uses, such as camping equipment or backyard barbecues, are brought to convenience and hardware stores to be filled or to be exchanged for full ones.