President Biden's decision to deplete the Strategic Petroleum Reserve (SPR) to its lowest level in decades is drawing attention once again as the conflict between Israel and Palestinian Islamist group Hamas escalates, causing oil prices to surge.
The recent volatility in the Middle East has led to a surge in oil prices, with both the Brent crude index and the U.S. WTI index surging more than 4% on Monday, inching closer to $90 a barrel. Analysts warn that the conflict could result in a significant reduction in global oil supplies.
Energy analyst Saul Kavonic stated in an interview with Reuters, "If the conflict envelopes Iran... up to 3% of global oil supply is at risk. And if a wider conflict eventuates that ends up impacting transit through the Strait of Hormuz, around 20% of global oil supply could be held hostage."
Analysts from Citibank added in a note, "Timing is everything and the attacks almost certainly postpone any Saudi-Israeli rapprochement, along with any high probability expectation of Saudi Arabia reducing or eliminating its extra 1 million [barrel per day] cut if prices resume their recent fall."
However, the Biden administration has already depleted the SPR, which is meant to serve as an emergency oil supply, to its lowest level in four decades. Currently, the SPR holds 351.3 million barrels of oil, a 44% decrease from January 2021 when Biden took office and the lowest level recorded since September 1983.
Since assuming office, President Biden has ordered the release of approximately 260 million barrels of oil from the SPR to address high fuel prices that affected consumers in late 2021 and mid-2022. While the administration has begun the process of refilling the emergency reserve, Republican lawmakers and energy experts have expressed concerns that these actions leave the U.S. vulnerable to short-term supply shocks.
Ben Lieberman, a senior fellow at the Competitive Enterprise Institute, criticized the administration's use of the SPR, stating, "There are a lot of reasons why the Biden administration should not have used the SPR to try to bring down prices one of which is that the SPR then isn't available if something serious happens. We're facing that right now. The point was for the nation to have an emergency oil supply."
Lieberman also highlighted the administration's hostility towards domestic oil production, making the decision to deplete the SPR even more concerning.
Earlier this year, Republican leaders, including House Energy and Commerce Committee Chair Cathy McMorris Rodgers and Senate Energy and Natural Resources Committee ranking member John Barrasso, requested an investigation by the Government Accountability Office into how the administration's SPR releases may indirectly threaten national security.
In their letter, the GOP leaders stated, "DOE's mismanagement of the SPR has undermined America's energy security, leaving the nation more vulnerable to energy supply disruptions, and increasing the ability for OPEC and Russia to use energy as a geopolitical weapon."
The SPR has a total capacity of 714 million barrels of oil and consists of four storage facilities in Texas and Louisiana. The 1975 Energy Policy and Conservation Act, which established the reserve, prohibits the release of any SPR stocks unless there is a severe domestic supply shortage, an act of sabotage, or a natural disaster.
The most recent emergency release of SPR stocks occurred during the Libyan civil war in 2011, when then-President Barack Obama tapped into the reserves due to the disruption of Middle Eastern oil supplies. Prior to that, the SPR was utilized during Hurricane Katrina in 2005 and the first Gulf War in the early 1990s.
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