Biden sold off nearly 50% of the Strategic Petroleum Reserve. Is that a problem?

The U.S. government is slowly replenishing the Strategic Petroleum Reserve.

In dozens of underground salt caverns nestled along the Gulf Coast in Texas and Louisiana sit hundreds of millions of barrels of crude oil, America’s “insurance policy” against the volatile nature of the global oil market.

Called the Strategic Petroleum Reserve, or SPR, it is the world’s largest emergency oil supply, and dates back to the 1970s, when it was created to ensure the U.S.’s future energy independence following the Arab oil embargo. At that time, America was dependent on foreign oil, and the embargo led to an energy crisis that rippled across the U.S. economy and culture, leading to winding lines at gas stations, sky-rocketing prices, and calls from then-President Richard Nixon to abstain from driving on Sundays and putting up holiday lights to preserve fuel. The SPR was established to avoid this happening again.

As of now, the SPR holds just over 369 million barrels, the lowest level since the early 1980s and a little more than half of the amount it held during its peak, in 2010-2011. That’s due to the sales of hundreds of millions of barrels authorized by President Joe Biden to try to lower gas prices throughout 2022, after Russia invaded Ukraine and gas prices spiked above $5 per gallon on average. Biden hoped more supply would lead to lower prices at the pump, which worked then (though to what degree is debatable). Now that prices have more or less leveled off, the U.S. Department of Energy is slowly replacing the stockpile, recently buying 3 million barrels to add to the supply.

Though Republicans have used the sales as a political talking point, experts say there’s little reason for the average American to worry too much about the SPR. Biden is far from the first president to release some of the barrels; both Republicans and Democrats have done so, particularly after hurricanes or other natural disasters, or even to generate revenue to pay down the national deficit.

“Any administration, Republican or Democrat, doesn’t have a lot of say when it comes to gasoline prices,” says AAA spokesperson Andrew Gross. “Tapping the reserve the way they did, it stopped prices from going a lot higher, it cooled things off a little bit. Then prices started to decline. It got the ball going.”

That said, Biden sold off the most barrels at one time since the SPR’s creation, according to the St. Louis Federal Reserve. As a result, the U.S. currently has enough oil in the reserves to fuel around 20 days of production, plus a commercial inventory—not an insignificant amount, should something go wrong that necessitates using even more of the supply.

“When people say, ‘Oh no, it’s so low,’ well, what is it there for? It’s there to help us out,” says Gross. “It’s the nice friendly aunt in the corner. She doesn’t say much but it is comforting that she is there.”

In fact, given that the U.S. produces significantly more oil than it did when the SPR was established (the country is now a net exporter), some question whether the reserve is necessary at all, or at its current size. A budget proposal from former President (and current presidential contender) Donald Trump called for selling off half of the reserves to pay down some of the nation’s debt.

As it stands, the reserve is a “nice insurance policy,” Gross says, and now that crude oil prices have fallen below the government’s target price of $79 per barrel, it is likely that further replenishments will be purchased soon.

This could be particularly important ahead of hurricane season, says Tom Seng, an assistant professor at Texas Christian University’s Neeley School of business with over 30 years in the natural gas industry. Any disruptions in the Gulf Coast could lead to additional sales from the SPR, depleting it further.

“We’re in good shape,” says Seng. “But it would be smart of the DOE to get a long-term contract in place to get it up to a much higher level.”

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