An energy crisis stemming from a Middle East conflict five decades ago led the United States to establish a substantial crude oil stockpile, known as the Strategic Petroleum Reserve (SPR).
According to an article by Politico on Monday, October 16 2023, this reserve was intended to safeguard the nation from potential threats posed by unfriendly nations.
However, the current disposition of this reserve is presenting a political conundrum for President Joe Biden.
In response to Russia’s invasion of Ukraine and rising fuel prices, the Biden administration chose to sell off more than 40 percent of the SPR last year.
This decision was made to mitigate the impact on fuel prices.
As a result, the SPR’s inventory is now at its lowest level since the early 1980s, a situation that has sparked Republican allegations that Biden has left the U.S. vulnerable to disruptions in global oil supplies.
The ongoing conflict in Israel involving Hamas has only intensified these concerns, raising fears of a broader regional war that could disrupt oil shipments from the Middle East.
House Natural Resources Chair Bruce Westerman (R-Ark.) criticized the administration’s actions, attributing the reduced SPR levels to President Biden’s attempts to lower gas prices before the upcoming election.
Meanwhile, former House Speaker Kevin McCarthy (R-Calif.) expressed his concern, stating that “our Strategic Petroleum Reserve is down to nothing.”
In reality, the SPR still contains 351 million barrels of oil, equivalent to nearly 56 days of total U.S. oil imports from the previous year.
However, this figure is considerably lower than the peak inventory of 727 million barrels during the Obama administration.
Additionally, private companies store an additional 424 million barrels in the U.S. as of early October.
The administration has defended its management of the SPR, asserting that the current inventory is sufficient to meet the nation’s strategic requirements and act as a buffer against price shocks.
Energy Secretary Jennifer Granholm emphasized that the SPR is the largest strategic reserve globally and expressed confidence in its capabilities during a House committee hearing in September.
The circumstances today differ significantly from those of 1973 when the Yom Kippur War prompted an Arab oil embargo, causing oil prices to skyrocket and leading to long lines at gas stations.
At that time, the United States faced declining domestic oil production and increasing demand, prompting the establishment of the SPR in 1975.
Fast forward to the present, and the U.S. stands as the world’s largest oil producer, exporting more crude and petroleum products than it imports.
The nation’s oil production is at record levels and continues to rise, even as demand stabilizes.
Over the years, some conservatives have called for the abolition of the SPR, arguing that it has been used as a political tool by various presidents.
Nevertheless, the reduced volume of the SPR limits President Biden’s options to respond to future oil market shocks, particularly those that may arise from an expanded Middle East conflict.
Even with a fully stocked reserve, the U.S. would not be immune to the price shock that would follow a conflict blocking the 20 million barrels of oil flowing daily from the Persian Gulf through the Strait of Hormuz.
However, a full reserve would have provided the White House with more flexibility to enforce sanctions against Iran’s oil exports.
The current low SPR levels place the United States in a position where it may have to rely on countries like Saudi Arabia with spare capacity to increase oil supply if Iranian oil shipments are disrupted.
Critics, particularly Republicans, have seized upon the state of the SPR as part of a broader critique of President Biden’s policies, including his emphasis on addressing climate change and his diplomatic efforts with Iran over its nuclear program.
The SPR’s dwindling reserves have prompted discussions about its importance in safeguarding the nation’s energy security.
In January, the House passed legislation aimed at limiting withdrawals from the SPR to instances of “severe energy supply disruption.”
While the legislation has yet to advance in the Senate, it signifies the growing recognition of the SPR’s value and role in preserving U.S. energy security.
President Biden has vowed to veto such legislation, underlining the complexities and debates surrounding the nation’s energy policy and strategic reserves.