The Problem With Refilling The Strategic Petroleum Reserve

Last year, the Biden administration conducted the largest ever sale from the Strategic Petroleum Reserve (SPR) to the tune of 180 million barrels, in a bid to stabilize soaring oil prices in the aftermath of Russia’s invasion of Ukraine. The administration set a target to start refilling the reserve once oil prices dropped to $70 per barrel but later the department announced that it hopes to sign purchase contracts for the oil at $79 a barrel.

But with WTI trading in the low to  mid-80s with prospects for another oil price rally as supply tightens, the volume of oil sitting in the reserve’s underground salt caverns in Texas and Louisiana has continued to sink and touched levels last reached in 1983. Indeed, the reserve held only 351 million barrels of crude as at Oct. 27 after another 20 million barrel drawdown in the current year, eliciting fresh concerns regarding the country’s energy security. And now some industry watchers are charging that the administration is dragging its feet on the matter.

“I don’t think they have any sense of urgency. Why in God’s name did the Department of Energy not sell at 100 and then buy at 70 when they had the opportunity to?” Ed Hirs, energy fellow at the University of Houston, told Yahoo Finance in a recent interview.

The Department of Energy has added a mere 5 million barrels to the reserve thus far this year, way too little given the magnitude of the shortfall. But the government has defended itself saying it has been grappling with a significant logistical hurdle to the replenishment. First off, it had to first complete congressionally mandated oil sales first imposed back in 2015 that had threatened to drain an additional 140 million barrels in the coming years to fund road maintenance and budget shortfalls, something it only managed to accomplish in March this year.

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