The United States was motivated to establish a significant reserve of crude oil in response to an energy shortage caused by a conflict in the Middle East half a century ago. This measure was intended to protect the nation from potential hostility from other countries.
The oil stored in partially filled salt caverns on the Gulf Coast is creating a difficult situation for President Joe Biden.
The Biden administration sold off a significant portion of the Strategic Petroleum Reserve last year in response to rising fuel prices caused by Russia’s invasion of Ukraine. This has left the stockpile at its lowest level since the 1980s. As a result, Republicans are criticizing Biden for leaving the U.S. susceptible to potential disruptions in global oil supply. This issue is compounded by the recent terrorist attacks by Hamas in Israel, which has raised concerns about potential disruptions to fuel shipments from the Middle East.
“It is Joe Biden’s responsibility for attempting to decrease gas prices before the election,” stated the House Natural Resources Chair.Bruce Westerman (R-Ark.) told POLITICO.
Previously, the former Speaker of the HouseKevin McCarthy
The representative from California, who goes by the initials R, expressed regret to journalists about the depletion of our Strategic Petroleum Reserve.
Currently, the reserve contains 351 million barrels, which is roughly 56 days’ worth of oil imports for the entire country last year. However, this is significantly lower than the peak of 727 million barrels held during the Obama presidency. Additionally, private companies in the U.S. were storing 424 million barrels as of early October.
The government has justified its management of the stockpile, stating that it still has a sufficient amount of oil to safeguard the country’s strategic requirements and mitigate any sudden price fluctuations. Energy Secretary Jennifer Granholm reassures, “I have no concerns about the current levels of the reserve.” 2019
In September 2019, the individual testified before a committee in the House.
, stating: “It holds the rank of being the biggest reserve for strategic purposes globally.”
In 1973, the United States faced an energy crisis due to the Yom Kippur War and an oil embargo from Arab countries. This caused a significant increase in gas prices and long lines at gas stations. To combat this issue, Congress passed a law in 1975 to establish an oil reserve, as the country’s oil production was decreasing while its demand for fuel was rising. As a result, the U.S. is no longer reliant on other countries for energy.
After fifty years, the United States has become the largest producer of oil in the world, exporting more crude oil and petroleum products than it imports. Its production levels are currently at an all-time high and are continuing to rise, despite stagnant demand.
The Heritage Foundation stated eight years ago that the Strategic Petroleum Reserve has been utilized by presidents as a means of political manipulation.
However, the reduced quantities of reserves restrict Biden’s choices for addressing potential disruptions in the oil markets in the future, such as those that may arise from an escalation of conflict in the Middle East.
Oil experts stated that even with a complete supply of oil reserves, the US would still face a significant price increase if any conflict disrupted the daily flow of 20 million barrels of oil from the Persian Gulf through the Strait of Hormuz. However, having a full reserve would have allowed the White House more flexibility in enforcing sanctions against Iran’s oil exports, according to BCA Research analyst Bob Ryan.
According to Ryan’s email, the SPR’s low levels mean that the U.S. may have to rely on countries like Saudi Arabia, who have extra capacity, to increase oil supply in case Iranian oil is cut off.
The government maintains that it is still upholding the economic sanctions put in place by former President Donald Trump on Iran in 2018. However, experts who track oil shipments report a significant increase in Iranian exports during President Biden’s term.
The Republican party has focused on the oil reserve as a way to criticize President Biden’s policies, which include addressing climate change and attempting to negotiate with Iran over their nuclear program.
Biden’s releases pulled more than 200 million barrels out of the petroleum reserve in the 10 months after Russia’s invasion of Ukraine sent international oil prices skyrocketing last year, with average U.S. gasoline prices jumping to a record high above $5 a gallon in June 2022. The releases continued, as planned, through the fall, a period that saw another supply disruption when the OPEC+ cartel announced a cut in oil exports.
According to the Treasury Department, the sale of oil from Biden’s reserve has resulted in a decrease of up to 40 cents per gallon in gasoline prices. As of Friday, the average national price for gasoline was around $3.63 per gallon, which is 28 cents lower than last year’s price.
In February, the government made an additional 26 million barrels available for purchase, as mandated by the Bipartisan Budget Act of 2015.
A majority of Americans supported Biden’s releases in a Morning Consult poll last year. And Sen. Tom Carper
On Thursday, the Department of Energy (D-Del.) pointed out that previous Republican and Democratic administrations have utilized selling oil from the stockpile as a means to alleviate market tensions.
Carper explained to POLITICO that it is not an ideal long-term solution, but rather a useful method to balance prices and prevent drastic fluctuations in the economy.
The longstanding practice of accessing the significant amounts of oil stored in the reserve has involved multiple instances of releasing it for non-emergency purposes, such as generating additional funds for the government.
A Republican-controlled Congress approved the sale of approximately 190 million barrels from the reserve through three laws enacted in 2015 and 2016. The funds were allocated for various purposes, including highway projects and drug approvals. In 2011, former President Barack Obama utilized the reserve to minimize disruptions in the oil market during the Arab Spring, which was met with criticism from Republicans. The Trump administration has also authorized the sale of 100 million barrels of SPR oil by 2027 to help balance budget deficits.
The original plan was to replenish the supply by purchasing oil from private companies, but this plan was suspended due to the persistent high prices of oil, which were above the target range of $67 to $72 per barrel.
When asked by POLITICO, White House representative Angelo Fernández Hernández stated that the Energy Department is still dedicated to their plan to replenish the Strategic Petroleum Reserve. This may involve purchasing oil, exchanging crude oil, or attempting to stop sales requested by Congress.
In a statement, Fernández Hernández declared that the President is dedicated to providing American citizens with a steady and reasonably priced source of energy. However, the statement did not mention the accusations from the GOP that these releases have made the country more susceptible.
The potential security threat of the reserve’s reduced condition largely relies on the outcome of the ongoing conflict between Israel and Hamas. As of now, the conflict has not escalated to involve oil-producing nations, thus mitigating concerns about a disruption in oil supply from the Middle East.
The initial conflict resulted in an increase in U.S. oil prices, rising from under $80 a barrel to $87 a barrel the day after the attack. By Friday evening, it had reached slightly below $88.
According to Anne Slattery, a partner at the risk consulting firm RSM, the conflict in Israel and the Gaza Strip should not significantly affect global oil and energy markets because these regions do not produce oil. As long as the conflict does not involve Iran and remains contained, the price of oil is expected to return to its pre-conflict levels.
Alternatively, if the Israeli conflict expands to involve Iran and limits their production of 3 million barrels per day, it is expected that global oil prices will rise. Currently, Iran exports approximately 2 million barrels per day, however, there is a possibility that political pressure on Biden to strengthen the implementation of sanctions could result in attempts to decrease these exports.
Tehran may react to this pressure by obstructing oil deliveries from Saudi Arabia and Iraq, which together accounted for approximately 5% of the U.S.’s oil consumption in the previous year.
According to analysts, the U.S. would not experience an oil shortage in this situation. However, the price of fuel for consumers would increase significantly as the global market attempts to make up for supply shortages in other nations.
According to Bob McNally, the president of Rapidan Energy, both sides are responsible for depleting the reserve throughout the years.
He stated that it is important to prioritize replenishing the stockpile in preparation for a potential geopolitical event related to oil. He pointed out that two such incidents have taken place since 2019, including Iranian drone attacks on Saudi oil fields and Russia’s intervention in Ukraine.
McNally, who was part of the National Security Council under the George W. Bush administration, commented on the realization that selling off our strategic reserve without careful consideration may not be a wise decision. He credits the current administration for acknowledging the issue of the SPR being too low, but notes that they are now facing the consequences.
In January, the House approved a bill with mostly party support that seeks to restrict withdrawals from the reserve in the event of a major energy supply disruption. This bill was one of the initial actions taken by the Republican-controlled House, but it has not made any progress in the Senate. Biden has pledged to reject it.
This report was contributed to by Kelsey Tamborrino and Anthony Adragna.