In a bid to curb escalating fuel prices following Russia’s incursion into Ukraine, the Biden administration opted to offload more than 40 percent of the Strategic Petroleum Reserve last year. This move has left the reserve at its lowest levels since the early 1980s.
Disruption in Supplies
As a result, accusations from the Republican camp have surged, asserting that Biden’s actions have exposed the United States to the risk of a disruption in global oil supplies. All of this unfolds in the midst of mounting tensions in the Middle East due to Hamas’ acts of terror in Israel, which raise concerns about potential disruptions in fuel shipments from that volatile region.
Fifty years ago, a turbulent Middle East conflict ignited an energy crisis, prompting the United States to embark on a monumental endeavor: the creation of an enormous crude oil stockpile strategically located to safeguard the nation against potential threats from less-than-friendly foreign powers.
Fast forward to today, and this stockpile, nestled within salt caverns along the Gulf Coast, presents President Joe Biden with a complex political predicament.
House Natural Resources Chair Bruce Westerman (R-Ark.) did not mince words when he declared, “That’s Joe Biden’s fault for trying to lower the price of gas before the election.” Meanwhile, former House Speaker Kevin McCarthy (R-Calif.) expressed his dismay, lamenting that “our Strategic Petroleum Reserve is down to nothing.”
Despite these concerns, it’s important to note that the reserve still holds 351 million barrels of crude oil, equivalent to nearly 56 days of total U.S. oil imports from the previous year. However, this pales in comparison to its peak of 727 million barrels during the Obama administration. Furthermore, private companies have stashed an additional 424 million barrels in the U.S. as of early October.
The administration has staunchly defended its approach to managing the reserve, asserting that it maintains an ample supply of crude oil to protect the nation’s strategic interests and act as a cushion against unexpected price shocks. Energy Secretary Jennifer Granholm, addressing a House committee in September, confidently stated, “I am not worried about the reserve levels at all,” underscoring that it remains the largest strategic reserve in the world.
Limiting Potential Response
In 1973, the Yom Kippur War triggered an Arab oil embargo against the United States, pushing it into an energy crisis. This dire situation sent prices soaring and forced Americans to endure agonizingly long waits at gas stations. During that period, U.S. oil production was on a decline, while its appetite for fuel steadily increased. In response, Congress passed legislation in 1975 to establish the reserve.
Fast forward fifty years, and the United States has transformed into the world’s largest oil producer, exporting more crude and petroleum products than it imports. Its oil output has reached record levels and continues to rise, even as demand plateaus.
Throughout the years, some conservatives have advocated for the elimination of the reserve, citing its misuse as a political tool by past presidents. The Heritage Foundation, for instance, voiced this sentiment eight years ago.
Nonetheless, the reduced volumes within the reserve limit President Biden’s potential responses to future oil market shocks, particularly those stemming from an escalation of conflict in the Middle East.
No Real Protection
Oil analysts argue that even a fully stocked reserve wouldn’t shield the United States from the price upheaval that would occur if a conflict disrupted the daily flow of 20 million barrels of oil through the Strait of Hormuz from the Persian Gulf. However, a complete reserve would have granted the White House greater flexibility in imposing sanctions to block Iran’s oil exports, according to Bob Ryan, an analyst at BCA Research.
The current relatively low levels within the SPR leave the U.S. in a vulnerable position, dependent on countries like Saudi Arabia and others with spare capacity to bolster supply in the event of an Iranian oil cutoff, as noted by Ryan in an email.
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