The United States Strategic Petroleum Reserve has fallen to its lowest inventory level seen since 1985 under the stewardship of President Joe Biden and his Democrat-controlled Congress. Repeated withdrawals from the reserve have been leveraged by the White House in an effort to control skyrocketing energy costs and stave off hyper-inflation that threatens to spiral out of control.
The SPR is located in a series of caverns along the Gulf coasts of Texas and Louisiana and has the capacity to hold 727 million barrels of crude oil. As of August 12, the U.S. Energy Information Administration reports that the reserve has been depleted down to 461.15 million barrels or approximately 63 percent of its capacity.
According to Phil Flynn, a senior energy analyst at The PRICE Futures Group writing for Fox Business, “That is a major concern because, despite the record releases from inventories, we are not seeing supplies of oil products like gasoline, diesel and home heating oil build ahead of winter.”
The SPR had stayed consistently above 80 percent inventory, since the reserve was ordered filled to capacity in 2001 by then-President George W. Bush, which took some time to complete. Former President Donald Trump issued a similar order in March of 2020, which pushed the reserve back up to 90 percent.
Flynn explained that despite oil prices falling approximately 10 percent and the record-shattering release of 180 million barrels from the reserve in March, the availability of usable oil products has not increased.
“Data released this week from the EIA showed that U.S. crude oil inventories are frighteningly below the 5-year average for this time of year, potentially making a cold winter season a problem,” he noted.
Starting in May, the United States will release one million barrels of crude oil a day from the Strategic Petroleum Reserve for six months, Biden said, launching the largest ever release from the U.S. emergency oil reserve, to try to bring gas prices down https://t.co/UT1WNRTUEi pic.twitter.com/iGPOMbiYtb
— Reuters (@Reuters) April 1, 2022
The industry expert went on to explain that there were several problems with this massive release. First, most of the SPR barrels were exported to foreign markets and not sold to domestic refineries. He noted that U.S. crude oil exports spiked to a record 5 million barrels per day in the last week.
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Furthermore, the type of oil exported creates problems for U.S. refiners. There are generally two types of crude oil stored in the SPR: sweet and sour. Sour crude contains greater quantities of sulfur and allows for greater production of distillates (ie., gasoline and diesel), which American refineries prefer. The U.S. has been exporting more sour crude oil, and the mass export of sour crude is counter-intuitive to stimulating supplies domestically.
Flynn quoted OPEC Secretary General Haitham Al Ghais, who cautioned the world about a potential supply crunch for oil in the next few months, even suggesting that Europe switching fuels to break away from Russian natural gas supplies could cause serious spikes in diesel prices in the winter.
“We are running on thin ice, if I may use that term, because spare capacity is becoming scarce. The likelihood of a [supply and price] squeeze is there.”
Al Ghais, when questioned over OPEC’s decision to only release 100,000 barrels of oil per day to the market after entreaties by President Joe Biden to the Saudi Crown Prince, defended the decision.
He stated that OPEC needed to ration its “severely limited” reserve with “great caution,” adding that it would be unwise for the oil cartel to release all of its reserves into the market. He noted that such an action would leave the global market with what Flynn described as “little or no spare capacity in the event of an emergency.”
Republican Sen. Ted Cruz of Texas heavily criticized the depletion of the SPR in an August 10 tweet.
Biden is depleting America’s Strategic Petroleum Reserve. The U.S. now has the lowest amount of oil in our emergency stockpile since 1985.
This is how much our reserves have dropped since Biden has been in office and it continues to fall: pic.twitter.com/FrRiZavbNF
— Senator Ted Cruz (@SenTedCruz) August 10, 2022
“Biden is depleting America’s Strategic Petroleum Reserve. The U.S. now has the lowest amount of oil in our emergency stockpile since 1985. This is how much our reserves have dropped since Biden has been in office and it continues to fall,” Cruz wrote, including a graph depicting the SPR’s inventory.