Fuel prices are rising but the Strategic Petroleum Reserve may not play a role in this phase of the Hormuz crisis.
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The cost of fuel is climbing again as the US-Iran war widens, but this time there’s little indication that Washington will tap its crude stockpiles to bring prices back down.
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Energy Secretary Chris Wright says another major withdrawal from the Strategic Petroleum Reserve isn’t on the table once the US completes the 172 million-barrel release that was announced in March, alongside action from other countries.
“There is certainly more oil in the SPR, but we have no thoughts whatsoever of needing any more,” Wright said in an interview on Wednesday.
In fact, it’s uncertain whether the 38.4 million barrels still left from the initial March release will actually be distributed. A late-June offering, which came as oil prices eased and Washington and Tehran edged toward a peace deal, drew tepid interest.
Wright said the administration “probably will” offer the remaining barrels, but he stopped short of making a commitment.
Source: Energy Information Administration
Wright’s comments come as the SPR sits at its lowest level in more than four decades, in part because of a historic withdrawal during the Biden administration. Created after the 1973 Arab oil embargo, the reserve now holds 307.7 million barrels — a level not seen since the early 1980s, when it was still in the process of being filled.
Analysts estimate the SPR’s operational floor, the point below which it becomes difficult to function, lies somewhere between 150 million and 200 million barrels. Wright, speaking separately with Bloomberg Television on Wednesday, said the reserve remains comfortably above that threshold.
“We are a long way from the operational floor,” he said. Because the current release is structured as an exchange, with companies later returning borrowed crude plus interest, he said the SPR will ultimately receive about 40 million more barrels than it initially loaned.
Meanwhile, fighting between the US and Iran continues to disrupt Middle Eastern energy exports, creating price pressure everywhere.
US commercial crude inventories are at their lowest since September 2018 and benchmark futures are back above $80 a barrel. Refineries are churning out record volumes of fuel, but the national average price of gasoline has risen above $4 a gallon again.
The first SPR release helped blunt the initial surge in fuel costs from the war, but maybe not this time.
—Ari Natter and Lucia Kassai, Bloomberg News
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