The United States government announced this Friday that it will buy some three million barrels of crude oil to begin refilling the country’s Strategic Petroleum Reserve (SPR), after millions of barrels were used this year. to try to combat high gasoline prices after the Russian invasion of Ukraine.
An Energy Department official said the first recharge will take place in February, although experts say it will take months or even years to bring reservoirs up to capacity.
The Strategic Reserve is currently at its lowest level in 38 years after Biden authorized the release of nearly 200 million barrels to try to alleviate high gasoline prices.
Republicans accused the president of using the reserve for political purposes, since high prices for consumers were negatively affecting the president’s popularity.
Oil market analysts say the decision now appears to suggest the end of the government’s drive to use the SPR to reduce crude costs and a sign of stability after prices began to fall substantially since the summer.
Currently, crude oil in the US and the world is trading at one of the lowest levels of 2022 with the benchmark West Texas Intermediate index at $74.29 a barrel on Friday afternoon.
Gasoline prices for consumers are now also lower than they were 12 months ago, according to official figures.
What is the US Strategic Petroleum Reserve?
The US Strategic Petroleum Reserve is a quantity of crude oil stored in underground caverns in the states of Texas and Louisiana. It was created after the Arab oil embargo in the 1970s to be used in emergencies.
These caverns can store a maximum of 714 million barrels of oil.
How is it used?
The use of the reserve is one of the few unilateral measures that a president can take just to try to control fuel prices, since its use is a presidential prerogative.
The law that established the reserve in 1975 says the president can order a limited reduction in the event of “domestic or international power supply shortages of significant scope or duration,” but can even order a full reduction in the event of a “serious interruption.” of energy supply” that threatens national security or the economy.”
The use of the reserve is not limited to cases of supply interruptions. The crude contained therein has been used in the past for a variety of reasons, including offsetting the impact of hurricanes and raising money to reduce the deficit. Oil from the reserve is always sold on the world market.
Why do we still depend on oil?
The United States and the world are currently dealing with climate change and the transition to cleaner energy sources, but are still dependent on fossil fuels for daily activities and the functioning of the economy.
Although the United States is an energetically independent country, fuel prices oscillate with the fluctuations of the global market, which is affected by factors such as the Russian aggression against Ukraine or the OPEC+ cuts, an organization that controls more than 50% of the world supplies and about 90% of the world’s proven reserves.
A study published by the British multinational oil company BP says that “some projections suggest that global oil demand could peak shortly after 2025, but others expect demand to continue growing until 2040 and beyond.”
Does any other country have a similar reservation?
According to the statistical office of the European Union, by July 2022 member states had a combined 759 million barrels of emergency oil reserves. For their part, China, India, Japan and South Korea also have strategic reserves.