Updating the SPR – America’s Energy Safety Net

Mark Green
Posted August 11, 2023

Let’s check in on where things stand with the Strategic Petroleum Reserve (SPR).

When last we looked, in late June, the government had announced it would begin refilling the SPR after drawing 180 million barrels last year to try to stabilize crude oil markets stressed by Russia’s invasion of Ukraine and strained as world economies recovered from the pandemic.

The SPR held about 348 million barrels on June 23 – down from approximately 568 million barrels at the end of March 2022 and down significantly from its peak of more than 726 million barrels in 2010.

The latest SPR data from the U.S. Energy Information Administration (emphasis ours):

• 347.8 million barrels in the reserve as of Aug. 4 – remaining at historically low levels.
• The SPR currently is at about 49% of its authorized capacity (roughly 714 million barrels).
• The administration’s 2022 drawdown of 180 million barrels constituted the largest annual decline on record.
• Though the administration ended its emergency sales from the SPR in the fourth quarter of 2022, SPR has declined an additional 24.6 million barrels (6.6%) this year, primarily from sales mandates by Congress under several pieces of longstanding legislation.

It appears the Biden administration’s plan to refill the SPR came partly in response to a sense that the reserve was too low. The U.S. Department of Energy (DOE) said it would buy 60 million actual barrels of crude, and the department encouraged Congress to cancel upcoming mandated sales (like those that already have occurred this year). The cancellations, of course, only prevent further reductions.

As for buying replacement barrels, DOE said it would make purchases when West Texas Intermediate (WTI) prices were around or below $72 per barrel. Yet, while WTI spot prices have dipped below $72/barrel a number of times, DOE has contracted to buy relatively small amounts totaling about 6.3 million barrels (or about 3.3% of what was drawn from SPR last year).

Why this is important: The SPR – used by Democratic and Republican administrations for various purposes going back decades – is America’s energy safety net. Historically, it has been used to protect American families and businesses during and after natural disasters and to reduce the impacts of geopolitical events disrupting crude oil markets. Obviously, the SPR at its current levels means there’s not as much of a safety net for major emergencies today as there was before last year’s drawdowns.

The administration’s actions to refill the SPR so far have been relatively small. And, of course, there’s always the option for the government to restart emergency drawdowns to address rising crude oil prices.

Bottom line: Given the pace of refilling the SPR so far, it seems likely the reserve will remain below its historical average for an indefinite period.