If the Middle East conflict gets worse, don’t hesitate to tap the US Strategic Petroleum Reserve
The ongoing Israel-Iran hostilities risk disrupting global oil markets and reigniting inflation. But the United States and its allies should not hesitate to release strategic reserves if this conflict threatens to spike oil prices. The US Strategic Petroleum Reserve (SPR) of crude oil is currently well-stocked for domestic needs.
After accounting for fifty-two-week averages of imports and exports, as well as current inventory levels, the SPR can cover 23.3 weeks’ worth of net oil imports, a historically elevated figure compared to the average of 16.9 weeks since 2009. Nearly 105 million barrels from the SPR could be released without falling below post-2009 historical levels of net import cover. Alternatively, 205 million barrels could be released without falling below the 10.8 weeks of net import coverage that prevailed, on average, from 1991 to 2008.
The United States’ SPR has shifted since the early 2010s, when it held nearly 730 million barrels, covering 11.5 weeks of crude net import demand, at fifty-two-week averages. With rising US oil production and exports, the SPR’s net import cover gradually increased over the early and mid-2010s.
As the United States rapidly became a major crude oil exporter, inventory management strategy shifted. Congressionally mandated sales from the SPR occurred from 2017 through the first days of the COVID-19 pandemic, as the barrels in inventory declined from around 695 million barrels at the beginning of 2017 to around 635 million barrels in April 2020. Inventories were further reduced between 2022 and 2023, as the United States and its allies worked to respond to Russia’s full-scale invasion of Ukraine and its effects on energy markets. Since mid-2023, the United States began slowly restocking the SPR, and it has added nearly 40 million barrels to inventories, which currently stand at nearly 383 million barrels.
While SPR inventories are at their lowest absolute levels in over three decades, the stockpile is very well-placed to meet its mission, which is to “reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program.” That’s because while the SPR’s crude oil inventory levels have fallen, US import needs have receded, even as US exports have surged. Accordingly, US net crude oil imports stand at just over two million barrels per day, down sharply from ten million barrels per day in 2007, or eight million barrels per day in 2017.
The rise in US crude exports and the drop in net imports have bolstered US oil security. However, challenges remain. US refineries are optimized for specific crude grades, many of which still need to be imported. Shifting light, sweet crude exports to domestic use could, for example, disrupt refineries optimized for heavier, more sulfuric crude grades.
Despite these limitations, SPR inventories are at elevated levels, allowing the United States to cover about 23.3 weeks of demand. Net crude oil import cover is sharply higher than before the shale boom, or even immediately before the COVID-19 pandemic.
Finally, US crude oil production is projected to increase by more than domestic petroleum products demand again in 2025. Technological improvements and—critically—the removal of energy infrastructure bottlenecks are supporting domestic crude production. The recently inaugurated Matterhorn Express natural gas pipeline, which runs west-to-east across Texas, will remove an important takeaway constraint from the Permian Basin, improving US oil production fundamentals and sending domestic output higher. Finally, US petroleum products consumption in 2025 is expected to increase only slightly, as domestic gasoline consumption may have peaked already. Accordingly, the US Energy Information Administration’s October Short-Term Energy Outlook projects US net crude oil imports will decline to 1.46 million barrels per day in 2025, enabling the United States to draw down inventories even further while still maintaining net import coverage.
In the coming weeks, the unfolding Middle East crisis could dominate oil markets. A significant escalation between Israel and Iran could spike oil prices. Despite uncertainties, US policymakers have ample SPR reserves and should use them if disruptions occur.
Joseph Webster is a senior fellow at the Atlantic Council. This article represents his personal opinion.
Further reading
Tue, Oct 8, 2024
A bipartisan Iran strategy for the next US administration—and the next two decades
Report By
As tensions spike in the Middle East, how should the next US president approach Iran and its network of proxies including Hezbollah and Hamas? With a strategy that can be maintained for decades, by administrations of either party. A bipartisan, expert working group lays out the details.
Mon, Aug 26, 2024
Hurricanes could upend US oil and gas exports and global energy markets. Here’s what to know.
New Atlanticist By Joseph Webster, Reid I’Anson, and Anya Herzberg
Texas and Louisiana are home to some of the world’s most important export sites for oil, liquefied natural gas, and other energy products. They’re also in the crosshairs of intensifying hurricanes.
Thu, Oct 3, 2024
How American diplomacy can stabilize Lebanon—and the Middle East
New Atlanticist By Daniel E. Mouton
As Israeli military operations focus on clearing Hezbollah fighters and weapons in southern Lebanon and Iran weighs additional attacks, US diplomacy must work to define the end point for the current escalation.
Image: A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. REUTERS/Richard Carson
Panikoff quoted in Morning Star on U.S. aid to Israel
Egypt grapples with political uncertainty under El-Sisi
Alkhatib in Foreign Policy: Is the Israel-Hamas War Closer to Its Beginning or Its End?
About The Author
