In a thought-provoking op-ed, Michael Levi of the Council on Foreign Relations has provided a very timely reminder of the role that the strategic petroleum reserves of the US and other nations would play if the turmoil in North Africa and the Middle East spawned another oil crisis. Neither additional drilling nor an accelerated effort on renewable energy would make any near-term difference if oil exports from the Middle East were disrupted. Both strategies are important for our future needs, but the only two tools we have for dealing with an immediate oil crisis are the Strategic Petroleum Reserve (SPR) and old-fashioned conservation. Unfortunately, we've wasted the last couple of years of relative oil-market stability that could have been spent bringing the SPR into the 21st century.

The US government currently has 726 million barrels of oil stored in underground caverns around the Gulf Coast, for use in emergencies. At that level, the SPR is essentially full. The stored oil notionally equates to around 80 days of supply at our current rate of net crude oil imports, though in practice it would provide 165 days of drawdown at the SPR's maximum pumping rate of 4.4 million barrels per day. That is in addition to commercial supplies of crude oil and gasoline and other petroleum products, which currently stand at the equivalent of 24 and 28 days, respectively. However, commercial stocks aren't much of a backstop, because the difference between current levels and those at which the system would start to run out in places amounts to less than a week of normal consumption.

We needn't worry about relying on the SPR if exports from Libya dry up. As I noted in Tuesday's posting, OPEC has more than enough spare capacity to make up such a shortfall, although it's of different quality and might result in some tightness in global diesel markets. But if the current unrest spread and threatened exports from the big producers on the Arabian peninsula, the only thing standing between consumers and much higher oil and product prices would be the SPR and its counterparts in other consuming countries. With combined inventories of at least 1.6 billion barrels, these reserves are in good shape to respond to a drop in exports of a few million barrels per day for several months, though not necessarily a sustained curtailment or a much larger one. And any use of these reserves should be coordinated among consuming nations, as Mr. Levi pointed out in his op-ed.

This all sounds good in principle, and I have no doubt that even the announcement of the intent of the US and others to draw promptly on these stocks if the situation deteriorates further would do a lot to calm markets. At the same time, it's important to understand how much the world has changed since the SPR was first planned and implemented, as a result of the first oil crisis in 1973-74. As I commented three years ago:

"In addition to importing much larger volumes of crude oil, our refinery capacity hasn't kept pace with demand, resulting in steadily growing imports of gasoline and gasoline blending components. And in the interim, oil production in Alaska and California has fallen into deep decline, requiring crude and product imports into a maxed-out West Coast refining system.

So instead of a strategic reserve designed to provide a back-up supply of crude oil to Gulf Coast and Mid-continent refineries serving the entire US east of the Rockies, our needs have expanded to encompass oil and refined product imports on all three coasts. These altered circumstances suggest the need for a more diverse and dispersed SPR, perhaps modeled along the lines of the federal Northeast Heating Oil Reserve. Nor do I believe that the only practical model of such a reserve entails government ownership and custody of the hydrocarbons in question. Other countries achieve the same end with a requirement for oil companies to maintain mandatory minimum inventory levels at no direct cost to taxpayers."

That's as relevant today as when I wrote it, with the addition that the SPR's potential effectiveness has been further affected by the buildup of crude in the Mid-continent as a result of increased output from Canadian oil sands projects and the rapidly growing output of the Bakken Shale. This is one of the main reasons why West Texas Intermediate is trading at roughly $100 this morning, while UK Brent crude, which is normally within $2 of WTI, has spiked over $118. I also can't resist pointing out that the market is hitting us in the face with a two-by-four concerning the potential energy security value of US natural gas, which is still trading at an oil-equivalent price under $27 per barrel for all of 2011, despite the events in the Middle East.

I don't blame the last two administrations or Congress for not having made SPR reform a higher priority in the last three years. They had a few other things on their plate. However, even if the current crisis in Libya and the Middle East resolves itself quickly and without further impact on world oil supplies, it provides another unwelcome reminder that we live in a world in which the President and other world leaders might need to call on our strategic oil inventories on very short notice to prevent a catastrophic breakdown of the economy. In that context, redesigning our 1970s-vintage SPR to be more effective in a greatly altered landscape ought to rise to a similar priority as addressing other urgent concerns such as the deficit.