Last year, in an effort to lower gas prices for Americans, the Biden administration began to sell crude oil reserves from the U.S. Strategic Petroleum Reserve (SPR). In August of 2021, the administration was releasing 1 million barrels of oil per day. Today, the SPR has been reduced to 347 million barrels – the lowest level since 1983 – presenting risks for domestic supply resilience and national security.
The SPR was never meant to be used as a political lever. After OPEC+ halted oil sales to the United States from Arab countries in 1975, the SPR was established to bolster domestic energy security in times of emergency. For nearly 50 years, it’s acted as a means of reducing our dependence on foreign countries and insulating Americans from oil price shocks. But as a result of President Biden’s SPR sales, the current reserves have been nearly halved in the last two years and there has been no progress towards refilling the stockpile.
Last October, the administration asked producers to increase production and proposed a plan to refill the depleted reserves by buying oil at a fixed future price of $67 to $72 per barrel. Due to the consistent mixed messages from by the administration regarding domestic production – some as clear as the President’s commitment to “no more drilling” – oil companies were wary to substantially change their production targets and commit to selling oil back to the administration at a fixed future price considering volatile oil prices.
This skepticism was not unfounded. A year after the administration announced its plan to refill the reserves, the Department of Energy has been slow to start the buybacks. In May of 2023, DOE announced that it had awarded supply contracts to companies to deliver 3.1 million barrels of oil to the SPR, only about 1 percent of the 291.3 million barrels that have been drained since Biden took office. The agency said in a statement:
“DOE is committed to executing an SPR replenishment strategy that provides the best deal for taxpayers — aiming to repurchase crude at a lower price than the average of about $95 per barrel it was sold for in 2022.”
In July, Secretary Granholm reiterated that commitment to replenishing the SPR but admitted that the pace of repurchases is slow, and that refilling it during Biden’s current term would be unlikely. Although future prices for WTI crude fell below $72 per barrel for most of June and July, creating the circumstances for a strategically important and economical trade, the Biden administration did not follow through on its commitment to repurchase reserves for the SPR.
Recently, Bloomberg Energy reporter Ari Natter pointed out that while it only took six months for the Biden administration to sell 180 million barrels from the SPR in the “fastest withdrawal on record,” it will likely take decades to refill the SPR to capacity, “if it happens at all.”
The slow pace of SPR repurchases prompted House and Senate Republican leaders to write a letter to the Government Accountability Office in May of this year, requesting that the independent agency evaluate the DOE’s mismanagement of the SPR. The letter, led by House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) and Senate Energy and Natural Resources Committee Ranking Member John Barrasso (R-WY), said:
“DOE’s mismanagement of the SPR has undermined America’s energy security, leaving the nation more vulnerable to energy supply disruptions, and increasing the ability for OPEC and Russia to use energy as a geopolitical weapon.”
While the administration drags its feet on refilling the SPR, OPEC+ members continue implementing both collective and unilateral production cuts specifically intended to raise oil prices and create volatility in the market. It’s yet to be seen if the DOE will follow through on its commitment to both the energy industry and American consumers, but if history is any guide, it’s likely that the Biden administration will continue to leave the country vulnerable to foreign actors’ interests.
Bottom Line: The SPR is what insulates the United States from oil shortages around the world, including supply shocks resulting from severe weather or infrastructure damage in regional domestic markets. President Biden’s reliance on the SPR to tame political pressures associated with high energy costs, while simultaneously disincentivizing domestic energy production, has put the country in a vulnerable position and undermined the utility of the crucial stockpile.
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