The Department of Energy recently announced the plan to replenish the Strategic Petroleum Reserve with a meager 6 million barrels. After draining the SPR to record lows in 2022, this plan seems far short of what many consider an appropriate emergency supply. This stage of Biden’s three-part plan to replenish the SPR has been met with some concern.
As the global oil crisis evolves, the DOE’s plan seems to be lacking urgency. Considering the president released over 15 million barrels of oil in 2022, the current plan to resupply the SPR using only 6 million barrels could leave the United States Reserves in short supply.
The Purpose of the SPR
Due to the actions of OPEC in the early 1970s, an oil shortage reached crisis levels. The SPR was first introduced in the 1970s by President Ford as part of the Energy Policy and Conservation Act. This policy was established to provide the United States with emergency energy resources in light of the potential shortage caused by OPEC cutting off supplies.
As a federal reserve of crude oil, the SPR served as an emergency resource to supply Americans with fuel in times of shortage, supply chain breaks, or disaster. This reserve of crude oil has helped alleviate oil costs, provided energy solutions in desperate times, and provided much-needed relief for the American people.
As America’s stockpile of crude oil, the SPR represents a valuable commodity for American citizens. With multiple locations, America’s reserve supply of crude oil has the potential to hold up to 1 billion barrels of oil. Since the 1970s, the SPR has been emptied and replenished multiple times to utilize and maintain a fossil fuel reserve stock.
Draining the SPR to Record Lows in 2022
In 2022, the Biden-Harris Administration allowed the SPR to be drained to record lows for the first time since the 1980s. With the ongoing war in Ukraine, the president elected to sell 30 million barrels of crude oil from the SPR to alleviate rising gas prices and supply chain issues. While this act did provide much-needed relief to American citizens, it significantly diminished the reserve supply of crude oil.
Biden’s release of SPR oil stands in conflict with his constant opposition to fossil fuels and oil production. As previous policies have indicated, the president wants to eliminate fossil fuel use. At the same time, the president himself has admitted we will need fossil fuels for several years before making the transition to renewable energy.
The 2022 release could be seen as the Government’s means of undercutting consumers by controlling the supply and profiting from the oil sales. However, at least 5 million of the 30 million barrels released bounced their way to Europe, not American citizens. This caused consumers to question the validity of Biden’s plan to “alleviate” high gas prices.
Average US Consumption of Oil
In 2022, Americans consumed an average of 20.28 million barrels of petroleum per day. Nearly all of the crude oil produced in America is refined into petroleum-based products. These products may include gasoline, jet fuel, diesel, and other fuel resources. Only a fraction of these fuels are used by consumers. With the vast majority of petroleum-based fuels being used in industrial, military, or commercial capacities, an oil supply shortage could cripple the United States’ economy and industry.
Of course, great strides have been made to transition to green and renewable energies to reduce America’s dependence on fossil fuels. However, we are not there yet. The transition to cleaner energy takes time and requires the use of oil and other fossil fuels for the foreseeable future. Even though the market for clean energy sources is booming, it is not without its trials and hurdles.
Despite the green movement, the demand for petroleum-based fuels has increased over the past several years.
The Ugly Truth About “Replenishing” the SPR
While the current Administration is painting this as a victory and ”significant progress,” the ugly truth about this action is it still falls far short. On average, the United States consumes 20.28 million barrels of oil per day. Replenishing the SPR with a scant 6 million barrels would not even provide enough reserve supply for a single day of normal usage.
The Administration purchased the oil at $73 per barrel, which they claim is a good deal for American taxpayers. Compared to the current average cost of $95 per barrel, $73 per barrel is lower and seems reasonable. However, the potential shortsightedness of restocking the SPR with fewer barrels could prove a much larger problem if supplies continue to dwindle.
As OPEC recently announced strict export limitations on their supply of oil and the ongoing war in Ukraine, the potential for a shortage of imported oil could increase over the next several years. Put in this light, failing to replenish the SPR adequately could prove disastrous down the line.
The Current Oil Crisis: OPEC+ Cuts Output
The oil crisis has only increased in complexity due to OPEC’s strict exploitation limits on its supply. This decision led to a near panic in the energy sector. In 2022, America imported over 8 million barrels of oil per day. Approximately 15% of that imported oil came from OPEC countries. The declaration that OPEC would limit supplies for the second time within a year sparked fear among American consumers.
President Biden’s Responses to Oil Shortage
President Biden’s response to OPEC’s decision earlier this year to cut the supply of exported oil was unenthusiastic at best. This blase reaction to OPEC’s announcement had many oil executives concerned. It’s no secret that the current Administration has stood on a platform of moving away from fossil fuels. With OPEC cutting supplies and the ongoing war between Russia and Ukraine, many hoped the president would react more aggressively.
President Biden’s plan to short-supply the SPR is a testament to the administration’s lack of urgency when protecting American oil reserves.
The Increasing Demand for Petroleum
Amid potential oil shortages and the Russian and Ukrainian conflicts, demand for petroleum-based fuels has increased over the past few years. Globally, the International Energy Association estimates that the demand for crude oil to produce petroleum fuels will increase by 2.2 million barrels per day in 2023. As oil demand is on the rise, the Department of Energy’s plan to restock American oil reserves could be seen as insufficient.
As the potential oil crisis unfolds, the energy sector and American consumers could see drastic changes in the future.
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