Recent legislation and last week’s announcement of a release of 50 million barrels of crude oil from the U.S. Strategic Petroleum Reserve (SPR) could see America’s strategic stockpiles drop to around 314 million barrels by the start of the 2032 fiscal year, from 618 million barrels as of early October 2021, the Energy Information Administration (EIA) said on Monday.
If strategic crude oil stockpiles nearly halve over the next decade, they would stand in 2032 at their lowest level since March 1983, the administration noted.
U.S. President Joe Biden said last week that the Department of Energy would release 50 million barrels of oil from the SPR in a bid to lower high gasoline prices in a coordinated effort with other major oil-consuming nations. The oil market, however, had largely priced in SPR releases, as the previous week’s slide in prices showed. Analysts also pointed out that one-off sales from strategic reserves cannot do much to move oil prices significantly lower.
Hours after the announcement of the SPR release, oil prices actually rose, erasing earlier losses—the opposite of the goal to reduce high crude oil and gasoline prices.
Oil prices plunged on Friday, but the crash had nothing to do with the announced SPR release. The market was spooked by a new heavily mutated COVID variant, Omicron, which is also believed to be more contagious than previous strains.
Apart from the SPR release announced last week, recent U.S. legislation plans for drawdowns of SPR stocks toward the end of the decade. For example, the Infrastructure Investment and Jobs Act, passed earlier this month, includes a provision to draw down a total of 87.6 million barrels of crude oil from the SPR in fiscal years 2028 through 2031, the EIA noted.
In addition, the Fixing America’s Surface Transportation Act, passed in 2015, and The Bipartisan Budget Act of 2018 collectively call for the sale of more than 160 million barrels of crude oil from the SPR in 2022 through 2027.
As a member of the International Energy Agency (IEA), the United States is obligated to maintain stocks of crude oil and petroleum products, both public and private, to provide at least 90 days of U.S. net import protection.