The U.S. Strategic crude Reserve (SPR) is being “emptied” in an effort to cushion the crude supply shock…
U.S. strategic oil reserves are now below the 500 million barrel mark , the lowest level since 1986, following the release of 6.9 million barrels last week .
According to the latest estimate of implied crude oil demand from the U.S. Department of Energy, against the backdrop of booming demand, the U.S. strategic oil reserve is only sufficient for 27 days of supply, a record low.
In response, Bob McNally, president of the Rapidan Energy Group, an energy consultancy, accused Congress that “Congress has been irresponsibly selling the SPR… Depleting reserves would make the country and the world more vulnerable to geopolitical shocks.”
On March 31 this year, the Biden administration announced that the United States will release 1 million barrels of strategic petroleum reserves per day in the next six months, a total of 180 million barrels of oil, the largest release since the United States established the oil reserve plan in 1974.
However, this effort has had little effect. As the chart below shows, while the U.S. strategic oil reserve (red line) keeps falling, oil prices (green line) are still rising.
In order to ease the pressure of high domestic oil prices, the Biden administration has played a “combination of punches”. In addition to releasing the SPR, it has also continuously urged opec to increase production and called on Congress to suspend the federal gasoline tax for three months . But analysts believe that the best solution is to increase production in North America.
According to the media, Tortoise Ecofin senior portfolio manager Rob Thummel said in a podcast that the best solution remains to increase oil and gas production from reliable supply sources such as the United States and Canada, which will help balance the global energy market and reduce the Geopolitical risks embedded in global oil and gas prices, thereby lowering oil prices.
In addition, according to earlier media reports, the United States will launch a long-term plan to replenish the strategic oil reserve this fall, with the first batch of purchases of 60 million barrels of crude oil , equivalent to one-third of the release plan.