Let it flow… The White House is heading back to the country’s emergency oil stockpile, in a push to pump the brakes on soaring gas prices that have Americans fuming (FYI: it’s an election year). President Biden authorized tapping 1M barrels/day from the strategic petroleum reserve for six months (total: 180M barrels). It’s the largest release ever, and the third time the SPR has been tapped in the last six months. Refresher:
- Sweet: Just like Canada keeps a strategic maple syrup reserve (#priorities), the US has four underground sites along the Gulf Coast with capacity to store 700M+ barrels of oil.
- Sour: The SPR was created in 1975, during another global oil crisis. Presidents have hit up the SPR a couple dozen times since then, mostly after supply-disrupting events like hurricanes or war.
Insatiable appetite… The US consumes 20M barrels of oil every day. Adding 1M barrels to the daily supply could lower crude prices, which would trickle down to the pump. But it’s not a sure bet: oil prices are set on complex global futures markets, and many analysts expect any dips to be temporary. When Biden last released 50M barrels from the SPR, it barely budged the price of crude. Tapping it again could bring short-term relief to consumers, which could help Dems in November.
Oil doesn’t grow on trees… While Russia’s war in Ukraine is aggravating the oil crunch, oil anxiety started early in the pandemic when demand collapsed, driving down prices. US oil producers got burned and have exercised restraint ever since, pressured by investors to maintain “capital discipline” (read: drill less, reinvest more). Surging prices give oil companies an incentive to drill more. But drillers are still reluctant, and would take months to ramp up.