Today, the Biden Administration announced that it was going to release 50 million barrels of oil from the strategic petroleum reserves to help lessen the rising fuel prices we are all experiencing. Here is the headline from FOX Business: Biden to release 50M barrels of oil from Strategic Petroleum Reserve amid gas price spike …
Let’s take a minute to better understand what this means — The United States Strategic Petroleum Reserve … The Department of Energy tells us: The Strategic Petroleum Reserve is a U.S. Government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coasts.
Current authorized storage capacity – 714 million barrels — Fill status – The SPR completed fill on December 27, 2009, with a cargo that arrived and began to unload on Christmas Day. The cargo was 493,000 barrels of Saharan Blend, a light sweet crude that was delivered to the Bryan Mound site. A sale and drawdown in 2011 reduced the inventory to 695.9 million barrels. Currently, there are roughly 605 million barrels of petroleum in the reserve down another 90 million barrels since 2011.
So, why exactly do we have a Strategic Petroleum Reserve? The Strategic Petroleum Reserve (SPR) is the world’s largest supply of emergency crude oil. It was established primarily 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.
The operative word here is — EMERGENCY! To the best of my knowledge, the current disruption in supply has been self-inflicted — OPEC and Russia are pumping as much oil as ever and when asked to increase their output by the Biden Administration, they politely declined. I will explain further.
It is important to note that on January 20th, 2021, the United States was completely energy independent, and we did not need OPEC or Russia or Venezuela or Iraq or Iran for their oil — But, on January 20th, that all changed when Biden began signing a number of executive orders shutting down new oil exploration in Alaska and withdrew permits to explore and drill in the Gulf of Mexico and off the east coast of the United States. He shut down fracking on federal land and he cancelled the Keystone Pipeline from Canada. Almost overnight, the United States went from energy independence to complete energy dependence on that part of the world we love to hate — The Middle East.
Keep in mind that the Strategic Petroleum Reserve was established and is to be maintained for an emergency.
The Department of Energy informs us that: In 2020, the United States consumed an average of about 18.19 million barrels of petroleum per day, or a total of about 6.66 billion barrels of petroleum. This was the lowest level of annual consumption since 1995. The drop in consumption in 2020 from 2019 was the largest recorded annual decline in U.S. petroleum demand. The decrease was largely the result of the global response to the coronavirus (COVID-19) pandemic.
Now, let’s do a quick calculation! In 2020, according to the Energy Department, our consumption as a country dropped to 18 million barrels per day— the lowest level of annual consumption since 1995. One can only guess that, with the effects of coronavirus dissipating, we are consuming more than that in 2020 … get the picture?
Biden releases 50 million barrels from the strategic reserve— by my calculations, that is the equivalent of exactly 2.7 days of petroleum — and that is based on the lowest annual consumption. For reference: In 2019, (pre-pandemic) more than 20 million barrels per day (b/d) of petroleum was consumed in the United States, and petroleum production—including crude oil, lease condensate, and natural gas liquids—reached a record 17 million b/d according to the Department of Energy.
So … just how does Biden’s announcement and action move the needle for prices at the pump for all Americans — IT DOES NOT! Once again, it is a Biden Administration sleight of hand, one that is intended to give the perception that he is doing something when in reality nothing is happening — except you are paying MORE for your gas than you have in a very long time.
And the Strategic Reserve will be depleted another 50M barrels — barrels that were to be part of the reserve and available in case of an emergency. Given our current state of affairs, just what might constitute an emergency?
Let’s start with Iran and Strait of Hormuz.
Since Joe made us dependent on OPEC and the Middle East for oil, we are once again subject to be held hostage by an Iranian regime who chants every Friday during prayers – “Death to America!”
Most of the oil coming out of the Middle East is coming out of the Persian Gulf — and it was not named the Persian Gulf for nothing. Iran, once known as Persia, can easily and effectively close the Straits of Hormuz if they wish.
Or perhaps, there will be a spat with China over Taiwan. The Iranians are more aligned with China than ever — oops, there goes Hormuz again.
Or maybe it’s a confrontation with Russia as they send their 100,000 troops across the border with Ukraine — the Americans can be stopped in their tracks if Russia turns off the oil. So, these scenarios are examples for which our Strategic Petroleum Reserve is intended to be used. It was never intended to be used to lower prices at the pump.
So … once again … we see that the Biden Administration is more concerned with perception than reality. As for the American consumer — Don’t expect to be paying less at the pump any time soon. The Saudi’s and Russians are making up for all that time and money that they were denied oil sales to the United States because of our energy policies, which reduced our dependence on foreign oil, throughout the Trump years.
As for the Biden Administration — all that can be said is STANDBY — You ain’t seen nothing yet!