Ann. Rev. Eneroy. 1985.10:515-56 Copyri~lht ©1985 by Annual Reviews Inc. All riohts reserved MANAGING THE STRATEGIC PETROLEUM RESERVE: ENERGY POLICY IN A MARKET SETTING R. Glenn Hubbard Department of Economics, Northwestern University, Evanston, Illinois 60201, National Bureau of Economic Research, Cambridge, MassachuSetts 02138, and John F. Kennedy School of Government, Harvard University, Cambridge, Massachusetts 02138 Robert J. Weiner Department of Economics, Harvard University, Cambridge, Massachusetts 02138 INTRODUCTION Ten years ago the US Congress authorized the creation of the Strategic Petroleum Reserve (SPR) with the intent of bolstering energy security. Today the Reserve stands at over 450 million barrels of oil--a large and potentially powerful policy instrument. The questions surrounding the Reserve, however, are many, complex, and largely unresolved. This paper examinesthese questions, in the process reviewing the analytical approaches to resolving them. The Problems of Oil Supply Disruptions Supply shocks are a recurrent feature of the modern, petroleum-fueled economy. Six times since World WarII the world has witnessed disruptions in the flow of crude oil from the Middle East. In 1953, 1957, and 1967, taking advantage of excess production capacity, governments and oil companies cooperated to patch the system together (1, 2). 515 0362-1626/85/1022-0515502.00 www.annualreviews.org/aronline Annual Reviews Annu. Rev. Energy. 1985.10:515-556. Downloaded from arjournals.annualreviews.org by Columbia University on 08/03/05. For personal use only.