The Administration may release more crude oil from the SPR to lower gasoline prices before the election

Never mind that the SPR is already at historically low levels, leaving the U.S. vulnerable to disruptions in crude oil markets at a time when the world is a powder keg of potential disruptions.

A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. REUTERS/Richard Carson/File Photo

White House senior adviser John Podesta said Tuesday, April 16, 2024, that President Joe Biden will do anything to ensure affordable gasoline prices. When asked if the Administration was considering releasing more crude oil from the Strategic Petroleum Reserve (SPR), Podesta answered:

The president did it (released oil from SPR) before ... and I think he wants to keep the price of gasoline affordable and he will do what he can to make sure that happens. (emphasis added)

Podesta spoke at the Bloomberg New Energy Summit in New York on April 16 and 17, 2024.

This Administration says it is so focused on saving U.S. taxpayers money that it suspended its crude oil purchases to replenish the SPR because of high oil prices. The Department of Energy canceled the purchase of about 3 million barrels of oil for the Strategic Petroleum Reserve earlier this month on April 3, 2024, because crude oil prices exceeded its self-imposed ceiling price of $79 per barrel:

The U.S. Department of Energy on Wednesday said it will not award oil supply contracts for Louisiana's Bayou Choctaw Strategic Petroleum Reserve (SPR) site in August and September due to high oil prices.

We monitor market dynamics to remain nimble and innovative in our successful replenishment approach to protect this critical national security asset, said DOE spokesperson Charisma Troiano.

Earlier in April of this year, Reuters reported that replenishment of the SPR salt caverns in Bayou Choctaw and Bryan Mound, Texas sites had to be delayed because “life extension” repairs were needed. They did not say that these repairs were required after President Biden’s Administration conducted the largest-ever sale of 180 million barrels from the SPR in 2022, draining the SPR to historic low levels. These“life extension repairs” were required because the salt caverns had been damaged by the Administration treating the SPR as a piggy bank instead of long-term storage for national security.

The SPR salt caverns were designed to be long-term storage caverns, not temporary storage tanks. The SPR was designed for oil to be released and refilled a maximum of 5 times before the walls of the salt caverns would become too thin and potentially leak. Crude oil is removed from the caverns by pumping in water, which pushes the crude oil out while maintaining the pressure needed to keep the salt caverns from collapsing. This process also removes salt from the caverns, weakening their walls. When the Biden administration decided to pump out and sell 180 million barrels of crude oil from the SPR for the purely political purpose of reducing gasoline prices before the midterm elections in 2022, the walls of the storage caverns were damaged to the point where they had to undergo repairs.

My take: The Biden Administration appears to be offering an endless stream of excuses of why it cannot replenish the crude oil in the SPR that was pumped out and sold for political reasons of achieving short-term reductions in gasoline prices before the mid-term elections in 2022. Clearly, the Biden Administration does not intend to relinquish the SPR and has no problems with the increased risk that low SPR levels pose.

Even more galling is that Senior Advisor John Podesta says President Biden will do anything he can to ensure affordable gasoline prices,” including drawing down the SPR even more. He did not say they were considering removing any of the over 200 restrictions on the U.S. oil and gas industry that this Administration has imposed since assuming power in 2020.

While the U.S. is the world’s largest producer of crude oil, most of which is low-sulfur, light crude oil, many U.S. refineries still depend on high-sulfur, heavy crude oil, most of which must be imported. U.S. energy security would have been preserved by allowing the Keystone Xcel Pipeline to be completed, but President Biden killed it on his first day in office. This leaves the U.S. vulnerable to disruptions in world crude oil markets at a time when such disruptions are occurring daily.

Sadly, even though the U.S. is the world’s largest producer of crude oil and natural gas, bad political decisions have left the U.S. vulnerable to the current powder keg of multiple potential wars and disruptions in the international flow of crude oil.

Thank you for reading “Thoughts about Energy and Economics.” This publication is reader-supported, so please “Like” it, share it with friends and colleagues, and become a paid subscriber. Your support is greatly appreciated!