Biden Reportedly Mulling Draining Strategic Oil Reserve Even More to Try to Tame Energy Prices

The US government began selling off large portions of the Strategic Petroleum Reserve (SPR) in late March, with the rainy day stockpile of sweet and sour crude oil recently ebbing to its lowest levels since 1984.

The White House is considering releasing even more crude from the SPR to try to tame the jump in oil prices that’s expected to arrive in time for the Christmas holiday season, Bloomberg has reported, citing multiple officials said to be familiar with the matter.

The crunch, expected to come in December as the latest European Union sanctions on Russian oil step into force, has prompted officials to start brainstorming ways to try to deal with supply shortages and price hikes.

No formal decisions on the SPR release have been taken, but it would take place in November, December or January if the go-ahead was given, according to the business outlet’s sources. Officials offered no indication on the size of the potential selloff.

The SPR’s crude inventories hit a low unseen in decades last week, with the estimated 442.5 million barrels in the emergency supplies enough to power America for about 22 days if all other sources of crude were to become unavailable. The last time the SPR reached 442.5 million barrels was in November 1984, a period when the US was topping up stocks amid a global oil glut.

The SPR has been dropping steadily over the past nine months, and the decline accelerated to double digits after the Biden administration announced that it would be selling off up to a million barrels of crude every day until October to try to stabilize domestic gasoline prices.

The Biden administration took severe flak from Republicans this summer after US media revealed that millions of barrels of oil from the reserve had been shipped abroad, some of it to a Chinese energy company with ties to the president’s son Hunter.

The SPR was created by President Gerald Ford in 1975 in the wake of the OPEC oil embargo following the Arab-Israeli Yom Kippur War of October 1973. The president is authorized to release crude from the emergency reserve only in the event of a “severe energy interruption” that’s deemed to threaten the economy or US national security.

Global energy prices crept up steadily throughout late 2021 and early 2022 amid a perfect storm of factors, including post-pandemic economic recovery, a colder than expected winter in Europe, reliance on short-term, spot price-based energy contracts, and poorer than expected performance of alternative energy sources such as wind and solar power. Prices exploded in the spring and summer of 2022 as industrialized Western economies moved to dramatically reduce their reliance on Russian energy supplies to try to “punish” Moscow for its special military operation in Ukraine.