Biden’s sold more than 40% of the U.S. Strategic Petroleum Reserves last year to limit rising fuel prices — drawing down the reserve to 352 million barrels, less than half the peak of 727 million during the Obama administration, Politico reports.
In fact, U.S. SPR stockpiles are at the lowest they’ve been since the early 1980s.
The U.S. first built up the reserve 50 years ago in 1975 when a war in the Middle East prompted President Ford to shield the nation from energy threats from unfriendly nations.
Today, the world faces another Mideast crisis between Israel and Hamas in the Gaza Strip. While oil is not produced there, energy analysts fear the impact on global oil prices if the Israeli conflict spreads to Iran, which produces 3 million barrels of oil a day.
“Since oil is not produced in Israel or the Gaza Strip, the outbreak of hostilities and its impact on the broader global oil and energy markets should be limited in scope and duration,” says Anne Slattery, a partner at RSM, a risk consulting firm. “As long as the conflict remains contained and does not directly involve Iran, the price of oil should ease back to pre-conflict levels.”
However, even if Iran doesn’t curtail production on its own, the Biden administration might bend to political pressures and restrict the flow of oil from Iran through stricter sanctions.
Brent futures shot up to $90.10 a barrel Monday, 10 days after the attack, up from $80 before the hostilities began.
House Natural Resource Committee Chairman Bruce Westerman, R-Arkansas, says it is “Joe Biden’s fault for trying to lower the price of gas before the election.”
Kevin McCarthy, R-Calif., former House Speaker, earlier said, “Our Strategic Petroleum Reserve is down to nothing.”
The Biden administration has defended its sale of oil reserves as a cushion against price shocks.
The U.S. Treasury Department estimates that Biden’s sale of reserve oil has reduced gas prices by 40 cents a gallon. On Friday, an average gallon of gas in the U.S. was $3.63, 28 cents less than a year ago.
“I am not worried about the reserve levels at all,” Energy Secretary Jennifer Granholm testified before the House of Representatives last month. “It is the largest strategic reserve in the world.”
While it is true that the U.S. is the biggest oil producer in the world today, some economists worry how the oil markets would handle a widening war in the Middle East.
Low SPR levels “leaves the U.S. in a position of relying on Saudi Arabia and others with spare capacity to ramp supply in the event of a cutoff” of Iranian oil,” says Bob Ryan, an analyst with BCA Research.
“It’s not a good idea to mindlessly sell off our strategic reserve,” says Bob McNally, president of energy and geopolitics consulting firm Rapidan Energy. “It’s to their credit that even the Biden administration has realized that the SPR has gotten too low—but now they’re getting mugged by reality.”
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