Surging Oil Prices Causing the Concern
The Department of Energy (DOE) called on Biden to cancel the ongoing plans to refill America’s oil reserves in August and September.
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The difficult choice comes down to a staggering increase in oil prices.
DOE Recently Refilled Several Reserves
One of the largest reserves in the country is the Bayou Choctaw site located in Louisiana.
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In March, the DOE solicited 3 million barrels of oil for a complete restock for the Strategic Petroleum Reserve (SPR).
Reserve Oil Established for Emergencies
In 1975 the SPR was created as one of the world’s largest emergency crude oil reserves in case of an oil supply disruption or intense economic issues.
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Disruptions and conflicts with other countries can easily trigger oil shortages in the U.S.
Energy Crisis Caused the Creation of the Reserve
President Gerald Ford established the reserve after the Organization of Arab Petroleum Exporting Countries (OAPEC) initiated an embargo against the United States. The embargo triggered an energy crisis that affected hundreds of millions of people.
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The energy crisis ultimately caused stagnant economic growth due the struggle of affording oil and other basic needs.
Increase Oil Prices Causing the Issue
Charisma Troiano, a spokesperson for the DOE, said that the organization need to remain nimble in replenishing their stocks.
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The issue ultimately comes down to the price of barrels of oil. When the DOE replenishes their stock with oil barrels at high prices, they have to resell them at the same cost which affects consumers and tax payers.
Stockpiles Hit Historic Lows Last Year
In the past year, the DOE has been withdrawing barrels at record levels. The administration took out an estimated 180 million barrels in 2022 due to the supply chain issues caused by the Russia-Ukraine war.
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The issues created by Russia invading Ukraine caused blockages to some of the largest shipping roads in the world and is still causing massive issues in the U.S.
Big Plans To Replenish Reserves
Energy Secretary Jennifer Granholm recently stated that the oil reserve will be replenished by the end of the year.
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Critics are speculating that when the price of barrels drops, the U.S. will be forced to purchase large quantities.
Administration Trying To Hit Specific Targets
The DOE sent out a statement clarifying that when oil hits $79 per barrel or below, they plan on buying back hundreds of millions of barrels.
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The strategy is a direct attempt to keep taxpayers’ costs low. Currently, a barrel of oil is sold for roughly $88. The peak hit in 2022 when barrels were being sold for $95.
Current Oil Reserves
According to data published by the Energy Department, the SPR has about 363 million barrels of oil.
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While this number might seem large, the average reserve sits at about 600 million barrels. In case of a massive energy crisis, even 600 million barrels would need to be distributed and reserved carefully.
Consultants Believe That Crude Oil Prices Will Remain High
Although the administration currently hopes that oil prices will drop in the next 6 months, experts disagree.
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A consultant for the Rapidan Energy Group, Bob McNally, who also served under former President George W. Bush thinks that oil prices will remain incredibly high moving forward.
Low Oil Reserves Puts U.S. At Risk
The depleted oil reserves stand to cause intense spice gouging and energy shortages if a crisis hits.
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Daniel Turner, the founder and executive at Power The Future, said in a statement that the Biden administration is “insane” to cut American oil production and then claim that they cannot refill the reserves at low prices.