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Crude Oil
January 30, 2025
HIGHLIGHTS
Increased SPR demand could increase crude prices
Needs Congress to cancel sales, approve funds
Refill process much slower than releases
US President Donald Trump's promise to refill the US Strategic Petroleum Reserve during his second term could face a host of practical and political roadblocks, experts told S&P Global Commodity Insights.
Trump pledged in his Jan. 20 inaugural address to "fill our strategic reserves up again right to the top." During his election campaign, he regularly criticized former President Joe Biden for releasing millions of barrels of crude, including 180 million barrels in 2022, as the Biden administration responded to global energy price shocks following Russia's invasion of Ukraine.
Filling the emergency stockpile would require Congress to reverse currently planned sales and appropriate new funds for additional purchases. It would also require favorable long-term pricing conditions: Refilling the SPR, even as quickly as possible, would take years, analysts said. And the increased demand from US government purchases could work against Trump's oft-stated goal of reducing energy prices.
"It would be a high hurdle to fill it to the top," Clayton Siegle, senior fellow in the energy security program at the Center for Strategic and International Studies, said at a CSIS seminar Jan. 28.
When Biden was inaugurated in January 2021, the SPR held 638 million barrels out of a maximum capacity of 714 million barrels. It now contains 394 million barrels, according to the US Energy Information Administration. Citing steady repurchases throughout 2023 and 2024 and the cancellation of previously planned sales, Biden's Department of Energy said it had accounted for all of the supply the administration released by the time it left office.
Biden's DOE also regularly touted the profit it turned on SPR trades, replacing crude sold for an average cost of $95/b in 2022 with supplies purchased at an average price of $76/b two years later. The DOE was publicly wary of adding demand into the market, setting a $79/b price ceiling and even canceling issued solicitations if prices moved too high.
Trump made lower consumer energy prices a cornerstone of his 2024 campaign. On Jan. 20, he released a flurry of executive actions declaring a US "energy emergency" and laying out plans to "unleash" energy development in Alaska.
"You have to consider the price consequences of a massive fill," Siegle said. "Lowering oil prices is an important priority (of this administration.) If you create a new source of demand to the tune of hundreds of millions of barrels, what do market experts think that's going to do to the price of oil?"
Despite the Biden-era oil trades representing what DOE called "a good deal for the American taxpayer," Republicans frequently criticized Biden's use of the SPR, arguing the 2022 releases sacrificed US national security in pursuit of a domestic political goal: to keep gasoline prices low ahead of the 2022 midterm elections.
That political disagreement may have fomented a new view toward the SPR among certain Republicans in Congress, said Kevin Book, managing director of ClearView Energy Partners.
"The politics of it got a little complicated after the drawdowns in 2022," Book said. "There are Republicans who have always had the view the SPR was an intervention that was unnecessary. ... But there are others who are now particularly activated by what they perceived as a partisan use of the SPR in 2022, which could make getting new funding on a bipartisan basis significantly harder."
Despite the drawdowns, buybacks and canceled sales during the Biden administration, about 99.6 million barrels of planned sales are currently required by Congress, as part of decades-long bipartisan lawmaking to use SPR sales to offset the costs of other legislation. Canceling those planned sales in the upcoming budget reconciliation process -- in which Trump and the GOP are searching for revenue to extend the President's signature 2017 Tax Cuts and Jobs Act -- could prove politically difficult, to say nothing of authorizing funds for new SPR purchases.
"There's no budget for it," Siegle said. "That can come out of the appropriations process, which we will get into soon here in the spring, but that's a political decision. If there's will from political allies and stakeholders on the hill, then I guess the administration could get funding for it. But it doesn't have any right now."
The physical limitations of the SPR refill process could also prove a barrier to Trump's plans. The SPR is designed to release crude into the private market at a rate of 4 million b/d, but pumping crude back into the underwater salt caverns that house the reserves is a much slower process.
Writing for TPH Energy Research, analyst Matt Portillo said the "theoretical max fill rate" of the SPR is roughly 785,000 b/d, which would take 58 weeks to refill the SPR to capacity.
"However, the SPR has never been filled at this rate, only reaching greater than 400,000 b/d over a given week 18 times since 1982," Portillo said. The fastest the SPR was refilled over a four-week span came in June 2020, when it averaged 365,000 b/d, he said.
DOE conducted regular maintenance on SPR sites throughout Biden's term, which also slowed the potential pace of refill and drew additional criticism.
"I think it's very irresponsible that the Biden administration put us in that position," Hess Corp. CEO John Hess, said at an American Petroleum Institute event Jan. 14. "I said (to the DOE), you know, you got to do something, change your piping, change your engineering, so you can put the million barrels a day back in that you took out. And they said, 'Yeah, we're working on it.'
"A year later, I went back to them and talked to them about it, and they haven't done one thing," Hess said. "It's irresponsible."
The DOE did not respond to a request for comment.
Hess has argued that the SPR's function is to give the US options in the face of a potentially catastrophic global supply disruption.
"It's an area we need to get on right away," Hess said. "We need to refill the SPR to 600 million for energy security."
Arnab Datta, managing director of policy implementation at Employ America, said presidents and Congress have taken a different approach in the past 15 years, as the shale boom made the US the world's leading crude oil producer and less wary of far-off disruptions in supply.
SPR volumes peaked Jan. 1, 2010, when the reserve held about 727 million barrels. At the time, the US produced 5.5 million b/d and imported 8.4 million b/d. In 2024, the US produced 13.2 million b/d, while imports fell below 8 million b/d in October 2024, the last month for which EIA has data. Canada accounted for over 4 million b/d of those imports, as imports from OPEC nations have steadily declined.
"People think of it as a national security asset," Datta said. "And it is. But if you go to the statutory provisions that authorized it, it has other goals too."
Among those goals, Datta argued, are minimizing price impacts on US consumers and acquisition procedures that support maximizing domestic oil production. In 2020, as global prices plummeted during the COVID-19 pandemic, Trump attempted to purchase crude to stabilize the market for domestic producers. His attempts were blocked by congressional Democrats, who labeled the move a bailout for "big oil."
"Since we've become the world's leading producer, the storage space in the SPR has itself become an asset," Datta said. "The goal should not be just refilling for refilling's sake."
Trump will have to balance several stated desires at once, Datta said: to incentivize investment in domestic production, while also lowering prices, while also refilling the SPR with millions of barrels in the years to come.
"If you want more investment, you have to keep the price at a level that incentivizes that investment," Datta said. "That might be consistent with acquiring and refilling -- but it's not consistent with low oil prices."