US Emergency Oil Reserves at Near 40-Year Low Amid Global Tensions | ORBITAL AFFAIRS

- Advertisement -

The U.S. Strategic Petroleum Reserve: A Critical Tool in Times of Global Tensions

Key Takeaways

  • After releasing substantial supplies in 2022, the U.S. Strategic Petroleum Reserve remains near a four-decade low.
  • That leaves the U.S. with less wiggle room to manage oil and gasoline prices as tensions rise in the Middle East.
  • However, as 2022 showed, releasing supplies from the reserve has limited ability to affect the sprawling global energy market.

If the ongoing turmoil in the Middle East boils over, U.S. consumers probably shouldn’t bank on a familiar government tool to ease the potential impact on what they pay for gasoline. The U.S. government created that tool, the Strategic Petroleum Reserve, in 1975 to maintain an emergency reserve of hundreds of millions of barrels of oil. But it currently has nowhere near that amount.

- Advertisement -

In fact, since President Biden authorized government sales from the reserve to combat rising oil prices after the Russia-Ukraine conflict began in 2022, it’s emptier than it’s been in nearly four decades. The vagaries of global oil markets and the complexities of the U.S. refining business have at best, demonstrated that SPR releases have a somewhat nebulous impact on U.S. oil and gasoline prices. Nonetheless, the SPR’s historically low level means the U.S. government has limited bandwidth to address any market disruptions caused by heightened hostilities in the Middle East—despite the Biden administration’s insistence the U.S. could again tap reserves.

- Advertisement -

Why Talk About The Strategic Petroleum Reserve Now?

Oil prices tend to react quickly to global conflicts, particularly those involving key global crude producers, such as Russia and almost any country in the Middle East. Brent crude rose 2% in the immediate aftermath of the Hamas attack on Israel in October last year, and has remained volatile since, even though some analysts think the global oil market already had accounted for increased tension in the Middle East. That doesn’t mean, however, that any new developments or even an escalation—were it to occur—couldn’t change the existing price dynamic.

There’s Just Not Enough In The Strategic Petroleum Reserve

If oil prices jumped suddenly and stayed high, in theory the strategic petroleum reserve should help. However, a severely depleted reserve may not have much to offer. The SPR contains 365.7 million barrels of crude oil, as of April 19, 2024, according to the most recent data available. While that figure has been rising over the past few months, it’s down 38% from 593.7 million barrels at the end of 2021, and about half the record high of 726 million barrels it maintained from late 2009 through early 2011. The U.S. consumes about 20 million barrels of oil each day, accounting for about 20% of the world’s daily consumption. Even though the SPR remains the largest known emergency reserve in the world, that still means existing SPR supplies would cover only 18 days of U.S. oil needs.

Can The Strategic Petroleum Reserve Really Help Bring Down Prices?

Even if the reserve had more to offer, it’s hard to pinpoint to what extent or how quickly the SPR release may have eased prices at the pump in the past. For example, prices for both Brent as well as West Texas Intermediate (WTI) crude rose as the Russia-Ukraine conflict began in February 2022, with the monthly average for the next month almost doubling compared with the previous year. Between March and December 2022, the U.S. sold 10 million to almost 30 million barrels of oil each month from the reserve, in an attempt to stabilize prices. Spot prices for West Texas Intermediate (WTI) crude, the U.S. price benchmark, hit an all-time high of $120 per barrel in early June 2022, three and a half months after the conflict started. It didn’t fall below the pre-conflict level until early September.

- Advertisement -

U.S. gasoline averaged an all-time high $4.93 per gallon in June 2022, up 48% from January, even as the SPR sold 100 million barrels in the first half of the year. Gas prices averaged higher than $3.69 per gallon—about 40 cents higher than before the conflict—until December of 2022 when they fell to $3.21.

As tensions rise globally and uncertainties loom over oil markets, the role and effectiveness of the U.S. Strategic Petroleum Reserve remain under scrutiny. While it may not be a panacea for all price fluctuations, it still serves as a critical tool in times of crisis.

Read the original article on Investopedia.

News Desk

- Advertisement -

Explore more

“Is ‘Devil in Ohio’ Based on a True Story?” | ORBITAL...

Do you have ever watched “Devil in Ohio” before? If not then you should sit on your comfortable couch and grab your favorite snacks...
Drew Gordon, Brother of Nuggets' Aaron Gordon, Dies at 33 - Death Cause Update | ORBITAL AFFAIRS

Drew Gordon, Brother of Nuggets’ Aaron Gordon, Dies at 33 –...

Drew Gordon, a former NBA player, died on Thursday night, according to reports. Shams Charania of The Athletic broke the story, reporting Gordon’s death...

TSMC to Receive ASML Machine, Stocks Jump | ORBITAL AFFAIRS

The ASML-TSMC Partnership: A Game-Changer in Semiconductor Manufacturing In the fast-paced world of technology, partnerships and collaborations play a crucial role in driving innovation and...

Judge Steve Harvey Season 4: Will There Be Another Season?

Steve Harvey, one of the famous personalities, is known for his amazing talk shows like Family Feud, Steve Harvey’s Big Time Challenge, and Family...
Robert Shinn: Allegations and Investigation | ORBITAL AFFAIRS

Robert Shinn: Allegations and Investigation | ORBITAL AFFAIRS

The pastor and leader of the talent management company, Robert Shinn, is the focal point of the new three-part documentary series, Dancing For The...

Elon Musk: Tesla’s AI Nvidia Spend to Hit $4B by 2024...

The Rise of Nvidia in the AI Era: Elon Musk's $3-4 Billion Investment Plan Key Takeaways Tesla CEO Elon Musk plans to...

Is ‘Good Will Hunting’ Based on Real Events? | ORBITAL AFFAIRS

In the realm of many classic movies in Hollywood, some old films still captivate the audience. One of them is “Good Will Hunting,” which...
OJ Simpson's Age at Death: All About Simpson's Passing | ORBITAL AFFAIRS

OJ Simpson’s Age at Death: All About Simpson’s Passing | ORBITAL...

OJ Simpson’s health has deteriorated in recent months, so it’s no surprise that the public is curious about how he died and how old...