Biden sold almost 50% of the Strategic Petroleum Reserve. This is a problem?

Dozens of underground salt caverns along the Gulf Coast in Texas and Louisiana hold hundreds of millions of barrels of crude oil, the United States’ “insurance policy” against the volatile nature of the global oil market.

Called the Strategic Petroleum Reserve (SPR), it is the world’s largest emergency oil supply and dates back to the 1970s, when it was created to ensure future energy independence for the United States following the Arab oil embargo. At the time, the United States was dependent on foreign oil, and the embargo caused an energy crisis that reverberated throughout the American economy and culture, leading to long lines at gas stations, skyrocketing prices, and calls from then-President Richard Nixon to refrain from driving. Sundays and put up Christmas lights to save fuel. The SPR was created to prevent this from happening again.

Currently, the SPR has just over 369 million barrels, the lowest level since the early 1980s and just over half the amount it had during its peak in 2010-2011. This is due to sales of hundreds of millions of barrels authorized by President Joe Biden to try to lower gas prices throughout 2022, after Russia invaded Ukraine and gas prices soared above $5. per gallon on average. Biden hoped that greater supply would lead to lower prices at the pump, which worked then (although to what extent is debatable). Now that prices have more or less stabilized, the US Department of Energy is slowly replacing reserves and recently purchased 3 million barrels to increase supply.

Although Republicans have used the sales as a political talking point, experts say there is little reason for the average American to worry much about SPR. Biden is far from the first president to release some of the barrels; Both Republicans and Democrats have done so, particularly after hurricanes or other natural disasters, or even to generate revenue to pay off the national deficit.

“Any administration, Republican or Democrat, doesn’t have much say when it comes to gas prices,” says AAA spokesman Andrew Gross. “Taking advantage of the reserve as they did prevented prices from rising much and cooled things down a bit. Then prices started to drop. He got the ball rolling.”

That said, Biden sold the most barrels at a time since the creation of the SPR, according to the St. Louis Federal Reserve. As a result, the United States currently has enough oil in reserves to fuel about 20 days of production, plus a commercial inventory, a not insignificant amount, in case something goes wrong and requires using even more supply.

“When people say, ‘Oh no, it’s so low,’ well, what is it there for? It’s there to help us,” Gross says. “She is the kind and friendly aunt on the corner. She doesn’t say much, but it’s comforting that she’s there.”

In fact, given that the United States produces significantly more oil than when the SPR was established (the country is now a net exporter), some question whether the reserve is needed at all or at its current size. A budget proposal from former President (and current presidential contender) Donald Trump called for selling half of the reserves to pay off some of the country’s debt.

As things stand, the stockpile is a “good insurance policy,” Gross says, and now that crude oil prices have fallen below the government’s price target of $79 a barrel, more will likely be purchased soon. replenishments.

This could be particularly important ahead of hurricane season, says Tom Seng, an assistant professor at Texas Christian University’s Neeley School of Business with more than 30 years in the natural gas industry. Any disruption on the Gulf Coast could lead to additional sales of the SPR, further depleting it.

“We’re in good shape,” Seng says. “But it would be smart for the DOE to sign a long-term contract to take it to a much higher level.”

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