U.S. oil stockpile is at a three-decade low
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America's oil stash could use some topping up.
Why it matters: The world needs oil right now — Iran has effectively shut down the critical Strait of Hormuz, through which about 20% of the global supply travels.
The latest: The Trump administration said on Wednesday that the U.S. would release 172 million barrels of oil from the Strategic Petroleum Reserve, or about 40% of what's in there now.
By the numbers: The reserve, which is stored in huge underground salt caverns along the Gulf Coast, currently holds 415 million barrels — about 58% of capacity.
Where it stands: The U.S. has the largest oil stockpile among the 32 countries planning to release 400 million barrels of oil to deal with the spike in prices.
- The coordinated release would amount to about 1.2 million barrels a day —about what the system can manage, JPMorgan Commodities Research finds.
- Though potentially calming for jittery markets, it would be insufficient to counter the potential loss of roughly 12 million barrels a day from a prolonged Hormuz shutdown, the JPMorgan analysts note.
Reality check: America has plenty of oil — it is the world's largest producer, after all.
- But storing enough oil for emergency use offers reassurance to markets that could restrain price spikes.
Catch up quick: The Trump administration has made replenishing the SPR a priority — but it has been slow going.
- The One Big, Beautiful Bill Act contained some funding to make it happen, but nowhere near the billions of dollars required.
- Even if the effort were fully funded, it would take a lot of time.
- "Adding barrels is also more logistically challenging than releasing them," says S&P Global Energy.
Zoom in: A fully funded effort — Energy Secretary Chris Wright put the number at $20 billion — made at the fastest possible speed of 4 million barrels a month would get the SPR filled back up by 2031, per S&P Global.
- And then there's a limit on how much can be drawn: The SPR must keep about 150 million barrels in place to maintain operational flexibility, JPMorgan noted.
Flashback: The U.S. Strategic Petroleum Reserve was established by President Ford in the wake of the 1973-74 Middle East oil embargo.
- U.S. presidents have authorized emergency releases from the SPR on only four occasions: President Biden's 2022 drawdown after the Russian invasion of Ukraine, in 2011 during a crisis in Libya, after Hurricane Katrina in 2005 and during Operation Desert Storm in 1991.
Between the lines: The release of oil reserves won't mathematically solve the problem of lost supply, but it will psychologically keep investors from bidding crude oil prices higher, Mark Malek, chief investment officer at Siebert, wrote in a note Wednesday.
- "The signaling effect can stabilize prices temporarily, even if the physical math doesn't work."
- "Think of it as the energy equivalent of Mario Draghi's famous 'whatever it takes' moment during the European debt crisis," Malek wrote. "The credible threat of coordinated action is doing more heavy lifting than the actual barrels ever could."
