The second official of the US Department of Energy said on Monday that the Biden administration may not be able to fully take advantage of the recent drop in oil prices to implement its plan for supplemental strategic petroleum reserves (SPR).
David Turk, Deputy Secretary of the US Department of Energy, pointed out that the US strategic petroleum reserves are currently at their lowest level since the 1980s. However, due to physical limitations and maintenance of underground cave networks along the Gulf Coast, the amount of oil that can be purchased by the US Department of Energy is limited to around 3 million barrels per month.
Turk stated in an interview during COP28 climate conference: “This is our physical limit on repurchasing quantity. We hope to replenish more strategic petroleum reserves at these price levels. We will repurchase as much as possible, but there are some physical constraints.”
With weakening demand growth prospects due to increased supply from non-OPEC countries, oil prices have fallen for two consecutive months. WTI crude oil fell 0.8% to $73.45 per barrel on Monday, reaching its lowest level since November 16th.
Data shows that currently, America’s strategic petroleum reserves amount to 350 million barrels, less than half of its historical peak since 2010. Last year, in order to stabilize oil prices and hit Russia’s economy, America extracted 180 million barrels from its strategic petroleum reserves. Refilling these barrels may take longer if it can actually be achieved.
Prior to last year’s release of 180 million barrels, the largest release was in 1991 with a volume of 31 million barrels when America launched military operations known as “Desert Storm” in the Gulf region; followed by Hurricane Katrina disaster period in 2005 with a volume of30 million barrels.
So far efforts towards replenishing reserves have been progressing slowly. The US Departmentof Energy requested an increaseof300millionbarrels of oil reserves last Friday. The agency claimed that since January, it has “ensured” an increase of 120 million barrels in oil reserves, including the direct purchase of 90 million barrels and another 40 million barrels to be returned by oil companies.
The day before, Tim Stewart, Chairman of the American Petroleum Institute, stated that the White House’s significant sale of reserves was aimed at addressing interruptions in crude oil supply rather than necessarily solving high oil prices.
When discussing Washington’s plan to replenish emergency reserves, he said: “They only need to add another 168 million barrels to restore reserves to their level in 2021 and about300millionbarrelsto fill them up. So this will cost a lot of money and take a long time.”
This expert concluded that depleting levels of strategic petroleum reserves would leave the US with fewer options in case its supply chain is disrupted and pose risks to national security.