The Trump administration is actively considering tapping into the nation’s emergency supply of crude oil as political pressure grows to rein in rising gasoline prices before congressional elections in November, two people familiar with the situation said.
No decision has been made to release crude from the 660-million-barrel stockpile, known as the Strategic Petroleum Reserve, but options under review range from a 5-million-barrel test sale to release of 30 million barrels, said the people, who requested anonymity to discuss non-public deliberations. An even larger release is possible it were to be coordinated with other nations.
The national unleaded average gasoline price rose to $2.89 Friday, up 63 cents or 28 percent from a year ago, according to data from AAA. The U.S. gasoline price average is expected to range between $2.85 per gallon and $3.05 per gallon through Labor Day, according to the group.
And as average prices close in on $3 a gallon -- they’re well above that in many locations -- Trump hasn’t been shy about voicing his displeasure.
“Oil prices are too high, OPEC is at it again. Not good!” he said on Twitter in June. On the Fourth of July, Trump tweeted: “The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two way street. REDUCE PRICING NOW!”
Oil prices have retreated since hitting a three-year high in New York at the start of the month, as the trade clash between the U.S. and China threatens economic growth and, as a knock-on effect, oil demand. West Texas Intermediate, the U.S. benchmark, settled at $71.01 a barrel on Friday, up 68 cents for the day but down 3.8 percent for the week.
Analysts are split on the effect an SPR release would have and how long any impact would last. Depending on its size and timing, an oil sale might leave the market unmoved, or have a real, if fleeting, impact on prices.
“An SPR release would have a psychological impact on the market. It may not translate into lower gasoline prices, but it would immediately bring down crude prices, at least temporarily, until the market adjusts,” said Joe McMonigle, senior energy analyst at Hedgeye Risk Management LLC.
Crude futures pared gains by as much as 67 cents, or 0.9 percent, after Bloomberg reported the Trump administration was considering tapping the oil reserve.
A release of crude oil in September or October could cut gasoline pump prices just in time for November’s mid-term elections. Trump could also use it as a tool to persuade buyers of Iranian oil to halt their purchases in the run-up to Nov. 4, when U.S. sanctions against the Islamic Republic are due to snap back.
A modest draw-down is already on the horizon: Congress has already mandated the sale of 11 million barrels starting as soon as Oct. 1.
“I would be very surprised if they were not thinking about it,” said Kevin Book, managing director of Washington-based consultancy ClearView Energy Partners.
“The DOE must begin planning its scheduled sales months in advance, so I suspect the timing of a scheduled sale as a market-management tool probably has been on their radar screens for weeks,” Book said.
The oil stockpile, the world’s largest supply of emergency crude, is stored in huge underground salt caverns along the U.S. Gulf Coast. It was created in the 1970s after the Arab oil embargo sent prices skyrocketing and forced Americans to ration gasoline, and is mainly meant to be used in emergencies. But it has been tapped in the past to bring down domestic gasoline prices, such as by President Bill Clinton in the 1990s, as well as to fund unrelated domestic legislation.
While Energy Secretary Rick Perry indicated he has no interest in utilizing the reserve, telling reporters last month it is “there for emergencies,” ultimately the decision is up to Trump.
The Energy Department declined to comment and the White House didn’t immediately respond to a request for comment.
“Like anything with this administration, you never know whether they really mean it or they’re just thinking out loud,” said James Lucier, managing director of research firm Capital Alpha Partners LLC.
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