Quick Update: U.S. Strategic Petroleum Reserve

The U.S. needs to stop selling crude oil out of the SPR and start replacing it

I published an article on the U.S. strategic petroleum reserves (SPR) on August 15 and wanted to provide an update since several significant events have occurred.

In that article, I said:” At the current drawdown rate, the SPR will be at a 40-year low of 358 million barrels by October this year, when withdrawals are slated to end.  One year ago, the SPR contained 621 million barrels of crude oil.  Unfortunately, there is a real possibility that the White House will not stop drawing down the SPR in October because the mid-term elections are in November, and they will not want to risk the political effects of skyrocketing crude oil and gasoline prices.”

The U.S. Department of Energy (DOE) has confirmed that withdrawals from the SPR will continue through November because the original Biden plan to sell 180 million barrels of crude out of the SPR has not yet been achieved, with total sales so far amounting to 155 million barrels as of the middle of September 2022.  The DOE announced on September 19, 2022, that it would sell up to 10 million barrels in November 2022.    If 10 million barrels per day are sold in October and November, the Biden Administration will still be 15 million barrels short of their goal of selling 180 million barrels out of the SPR, leaving the door open for additional sales in December and maybe even into 2023. 

As reported by the EIA on September 23, 2022, the latest data available as of this writing, the amount of crude oil remaining in the SPR is 422.583 million barrels, the lowest level since July 1984.  If the DOE sells 10 million barrels per day in October and November as announced, the volume of crude oil stored in the SPR will be 402 million barrels on December 1, 2022, the lowest level since May 1984.

This is a dangerously low level given the political powder keg caused by the Russian invasion of Ukraine, the “whodunit” sabotage of Russia's Nord Stream 1 and 2 pipelines, and the onset of winter which will increase the demand for crude oil.

Another problem with this low level of strategic petroleum reserves is that the U.S. has an agreement with the 30 other members of the IEA (International Energy Agency) which was signed in 1974. Under that agreement, all IEA member countries must hold emergency crude oil stocks equal to at least 90 days of net oil imports. If our SPR drops to 402 million barrels by the end of October, the US will be short of its obligation by about 165 million barrels since the U.S. imports approximately 6.3 million barrels per day; so 90 days of crude oil in storage is 567 million barrels.

The bottom line is the U.S. needs to stop selling crude oil and start buying it ASAP to replenish the SPR.  Of course, this additional demand for crude oil will put upward pressure on crude oil prices, so the Biden administration is not likely to do it, leaving the U.S. with a dangerously low level of strategic petroleum reserves.

This is a critical and developing situation and I will continue to monitor and provide updates.

Thank you for reading “Thoughts about Energy and Economics.”  If you find these essays valuable, please subscribe so new articles will be delivered to your inbox.  Also, please help expand our community by adding your “Like,” sharing this article with friends, and posting links to it on social media. Your support is appreciated. Ed Ireland