The White House keeps prices in the energy market from exploding even further with trickery. They do it by selling a large chunk of its Strategic Petroleum Reserve (SPR). It’s finite, and it isn’t a solution. Bloomberg’s Javier Blas writes that the US is depleting its cache faster than it looks.
Earlier this week, the International Energy Agency warned that “global oil supply may struggle to keep pace with demand next year.” At the same time, the US is single-handedly keeping prices down. They are doing it by selling off the best petroleum.
“To understand the limits of the SPR…the White House has sold almost 115 million barrels from its hoard, with the releases surging to a record high of nearly one million barrels per day since mid-May. At the current rate, the US is selling more barrels from its reserve than the production of most medium-sized OPEC countries, such as Algeria or Angola.”
By October, the US Strategic Petroleum Reserve will shrink to a 40-year low of 358 million barrels. This is as the White House taps it to put a lid on global oil prices. That is right before the election.
A year ago, the SPR, located in four caverns in Texas and Louisiana, contained 621 million barrels.
The oil situation is so dire that it’s hard to see how the US halts sales in October.
The White House could sell more crude in November, December, and next year. However, not all of the crude set aside is equal. And what’s left is, increasingly, far less useful than what’s already gone.
It would last about a year-and-a-half, and then we’d have none for emergencies.
“Broadly speaking, the SPR contains two kinds of crude: medium-sour and light-sweet. Medium and light refer to the oil’s density. Sour or sweet refers to sulfur content. Typically, US refiners prefer medium-sour crude, which is denser and has more sulfur but is a variety they can easily process into gasoline and other products thanks to their highly sophisticated plants.”
The US is mostly selling the best of the SPR right now, medium sour.
“As the White House fed American refiners with their preferred variety, those sales have reduced the amount of medium-sour crude inside the reserve dramatically — and it’s set to decline further over the next four months. OilX, a consultant, estimates that by the end of October, the SPR will hold only 179 million barrels of medium-sour crude. To put that into perspective, during the period June 2021 to October 2022, the US is likely to sell about 180-190 million barrels of medium-sour crude from the reserve. Clearly, Washington is running out of firepower to repeat that exercise. “
Saudi Arabia has medium-sour, thus Biden’s trip to the Kingdom.