The recent escalation in tensions between Israel and the Palestinian group Hamas has once again highlighted the Biden administration’s decision to significantly draw down the Strategic Petroleum Reserve (SPR). Oil prices soared, with global benchmark Brent crude and the U.S. WTI index both rising over 4% and nearing $90 a barrel due to the unrest in the Middle East.
Experts believe that the ongoing conflict, sparked by surprise attacks from Palestinian militants on Israelis, could disrupt significant global oil supplies. Energy expert Saul Kavonic told Reuters that if the situation escalates to involve Iran, up to 3% of the global oil supply could be endangered. And if the Strait of Hormuz becomes compromised, almost 20% of the global oil supply could be at stake.
Additionally, Citibank analysts remarked that the present disturbances likely delay any potential reconciliation between Saudi Arabia and Israel. This might affect any anticipated reduction of Saudi Arabia’s additional daily oil cut of 1 million barrels, especially if prices continue to drop.
Yet, the U.S. SPR, designed for emergencies, now stands at its leanest in 40 years. With 351.3 million barrels of oil, it’s down 44% since Biden’s inauguration in January 2021. This level was last observed in 1983. Since becoming President, Biden authorized the release of approximately 260 million barrels from the SPR to address soaring fuel costs in late 2021 and mid-2022. Though there are plans to replenish the reserve, many, including Republican politicians and energy professionals, are concerned about the nation’s preparedness for sudden supply disruptions.
Ben Lieberman from the Competitive Enterprise Institute expressed to Fox News Digital that the SPR should not have been used as a tool to regulate prices. He stressed its purpose was to serve as a safety net in critical situations. He also criticized the administration’s stance on domestic oil production.
Furthermore, earlier in the year, leading members from House and Senate energy committees requested an investigation into whether the SPR drawdowns might indirectly compromise national security. The Republican representatives mentioned concerns about the U.S. becoming more susceptible to energy supply interruptions and increasing OPEC and Russia’s geopolitical leverage.
The SPR, with a total capacity of 714 million barrels, is housed in four facilities in Texas and Louisiana. Set up by the 1975 Energy Policy and Conservation Act, its reserves can only be tapped during significant domestic shortages, sabotage events, or natural disasters.
Before 2021, the SPR was accessed in emergencies like the Libyan civil war in 2011 during President Obama’s tenure, when Middle Eastern oil was restricted, Hurricane Katrina in 2005, and the first Gulf War in the early 1990s.