The White House is worried about prices at the pump coming up to the November election and is contemplating another release from the Strategic Petroleum Reserve (SPR) that it has already significantly drained prior to the mid-term election in 2022. Gasoline prices are slightly lower than they were this time last year, but they may be too high for President Biden since they can become a campaign issue. The national average price for a gallon of gas is currently about $3.46 per gallon, 3 percent below the $3.58 per gallon during this time last year and about 50 percent higher than they were in 2021. The SPR is the only tool that the White House has available to lower gasoline prices. So, according to economic and energy adviser Amos Hochstein, the nation could see new SPR releases, despite the administration working to partially replenish the reserve.
Earlier this month, the Energy Department said it planned to accelerate the pace of purchases, after it had earlier announced that the purchases were to be limited due to the Congressionally authorized sale of SPR oil. That is, the Biden administration intended to reduce the overall size of the SPR, using the cancellation of planned long-term sales by Congress as justification. Congress had scheduled long-term sales for budget reduction purposes in the face of rising domestic production.
According to Hochstein, “We will do everything we can to make sure that the market is supplied well enough to ensure as low price as possible for American consumers.” He added, “I think that we have enough in the SPR if it’s necessary.” The Department of Energy recently announced that it would be releasing 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve over the summer months to try to tame prices at the pump.
Between 2021 and 2023, the Biden administration drew the SPR down by 291 million barrels including Biden announced “emergency” releases and regularly scheduled sales, reducing the level of oil in the SPR by 46 percent—leaving it at the lowest level in 40 years. Several million SPR barrels released ahead of the 2022 elections were sold to Chinese entities. Only 14 million barrels have been refilled since then, or 4.8 percent of the 291 million released during the three previous years. If more oil is released from the SPR to help keep Biden in office, the emergency reserve may never get refilled, particularly if a second Biden term results in policies that are more destructive to the oil and gas sector than those of his first term.
One perspective offers the following: if oil prices reach the $85 to $90 a barrel range, the Biden administration will start SPR releases between August and September to impact the November U.S. presidential election. OPEC+ has announced that it will start slowly reducing its voluntary cutbacks this fall, but if the Biden administration adds oil to the market, OPEC+ could change course. Since OPEC+ will not be meeting until the end of September to finalize the voluntary cut reduction for quarter 4, it will have the upper hand. If the Biden administration decides to release SPR oil, OPEC+ can extend the voluntary production cuts for another quarter to offset the SPR release. If the Biden administration decides not to release SPR and oil market fundamentals are meaningfully tighter, then OPEC+ can stay on the path it has announced. Should the SPR release occur, it is expected to be at 30 million barrels.
Background
The SPR was established following the 1973 oil crisis as an energy security measure. Following the 1980 election, the SPR totaled 112.5 million barrels in January 1981, and by the end of President Reagan’s term, it had grown to nearly 450 million barrels in January 1989. Both Presidents Bush increased the capacity of the SPR: George H.W. Bush added 13.8 million barrels, while George W. Bush, who shored up SPR reserves after 9/11, added a net 162 million barrels by January 2009. During Operation Desert Storm, 21 million barrels were used and 11 million barrels were used following Hurricane Katrina, which decimated coastal oil refineries. Releases from the Strategic Petroleum Reserve via a president’s orders — such as during Desert Storm and following Katrina — have been rare.
Since that time, every president plus President Clinton has seen oil reserves withdrawn during their administration. President Clinton saw a net withdrawal of 33.7 million barrels, President Obama saw the SPR reduced by about 9 million barrels and the Trump administration oversaw a drawdown of about 57 million barrels. The Biden administration, however, has overseen the largest drawdown, having received a reserve of 638 million barrels when entering office. As of 2023, the SPR has a maximum capacity of 714 million barrels, but currently holds just 370 million barrels, mostly of light oil that U.S. refineries do not use because they retooled to take heavier oil before the shale oil renaissance took place. President Trump tried to fill the SPR when oil prices were at a very low $24 per barrel, but was stopped by Congressional Democrats. Senate Majority Leader Chuck Schumer celebrated the block at the time, claiming removing the provision from a bill “eliminated a $3 billion bailout for Big Oil.”
In an attempt to halt politicization, Energy and Commerce Committee Chair McMorris-Rodgers authored the Strategic Production Response Act, which would limit SPR drawdowns until Congress can provide oversight while banning withdrawals for “nonemergency purposes.” The bill passed the House and is currently stalled. The Biden White House did announce opposition to the McMorris-Rodgers’ bill, claiming it would “significantly weaken a critical energy security tool.” In 2023, the White House said, “This administration’s use of the Strategic Petroleum Reserve has been essential to protecting our energy security and to lowering gas prices for Americans.” There was no explanation of how selling oil from the Strategic Petroleum Reserves before elections protects the nation’s energy security.
Conclusion
The Biden White House is contemplating another SPR release before the November election if oil prices increase to keep gasoline prices at a range that it feels will not impact the election negatively for President Biden. The SPR release might be as large as 30 million barrels. President Biden has withdrawn more oil than any President since the establishment of SPR, with a total of 291 million barrels withdrawn, including Biden announced “emergency” releases and regularly scheduled sales. It is unclear how many barrels the Biden administration will replenish given mixed announcements from the Biden Energy Department. Oddly, green groups opposed to the use of oil have not objected to Biden’s sales, which are equivalent to 4.4 years of maximum production from Alaska’s Willow Project they strongly opposed.
