US Emergency Oil Reserves Remain at Near Four-Decade Low Amid Rising Global Tensions

Key Takeaways

• After releasing substantial supplies in 2022, the U.S. Strategic Petroleum Reserve remains near a four-decade low.
• That leaves the U.S. with less wiggle room to manage oil and gasoline prices as tensions rise in the Middle East.
• However, as 2022 showed, releasing supplies from the reserve has limited ability to affect the sprawling global energy market.

If the ongoing turmoil in the Middle East boils over, U.S. consumers probably shouldn’t bank on a familiar government tool to ease the potential impact on what they pay for gasoline.

The U.S. government created that tool, the Strategic Petroleum Reserve, in 1975 to maintain an emergency reserve of hundreds of millions of barrels of oil. But it currently has nowhere near that amount.

In fact, since President Biden authorized government sales from the reserve to combat rising oil prices after Russia-Ukraine conflict began in 2022, it’s emptier than it’s been in nearly four decades.

The vagaries of global oil markets and the complexities of the U.S. refining business have at best, demonstrated that SPR releases have a somewhat nebulous impact on U.S. oil and gasoline prices.

Nonetheless, the SPR’s historically low level means the U.S. government has limited bandwidth to address any market disruptions caused by heightened hostilities in the Middle East—despite the Biden administration’s insistence the U.S. could again tap reserves.

Why Talk About The Strategic Petroleum Reserve Now?

Oil prices tend to react quickly to global conflicts, particularly those involving key global crude producers, such as Russia and almost any country in the Middle East.

Brent crude rose 2% in the immediate aftermath of the Hamas attack on Israel in October last year, and has remained volatile since, even though some analysts think the global oil market already had accounted for increased tension in the Middle East.

That doesn’t mean, however, that any new developments or even an escalation—were it to occur—couldn’t change the existing price dynamic.

There’s Just Not Enough In The Strategic Petroleum Reserve

If oil prices jumped suddenly and stayed high, in theory the strategic petroleum reserve should help. However, a severely depleted reserve may not have much to offer.

The SPR contains 365.7 million barrels of crude oil, as of April 19, 2024, according to the most recent data available. While that figure has been rising over the past few months, its down 38% from 593.7 million barrels at the end of 2021, and about half the record high of 726 million barrels it maintained from late 2009 through early 2011.

The U.S. consumes about 20 million barrels of oil each day, accounting for about 20% of the world’s daily consumption. Even though the SPR remains the largest known emergency reserve in the world, that still means existing SPR supplies would cover only 18 days of U.S. oil needs.

Can The Strategic Petroleum Reserve Really Help Bring Down Prices?

Even if the reserve had more to offer, its hard to pinpoint to what extent or how quickly the SPR release may have eased prices at the pump in the past.

For example, prices for both Brent as well as West Texas Intermediate (WTI) crude rose as the Russia-Ukraine conflict began in February 2022, with the monthly average for the next month almost doubling compared with the previous year.

Between March and December 2022, the U.S. sold 10 million to almost 30 million barrels of oil each month from the reserve, in an attempt to stabilize prices.

Spot prices for West Texas Intermediate (WTI) crude, the U.S. price benchmark, hit an all-time high of $120 per barrel in early June 2022, three and a half months after the conflict started. It didn’t fall below the pre-conflict level until early September.

U.S. gasoline averaged an all-time high $4.93 per gallon in June 2022, up 48% from January, even as the SPR sold 100 million barrels in the first half of the year. Gas prices averaged higher than $3.69 per gallon—about 40 cents higher than before the conflict—until December of 2022, when they fell to $3.21.

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