A potential release from the U.S. Strategic Petroleum Reserve intended to bring down gasoline prices may have little effect, oil market participants warn, even as the Biden administration floats the idea as a way to provide immediate relief at the pump.
U.S. President Joe Biden “is looking at” releasing a potential wave of crude supply from the U.S. emergency reserves after OPEC+ rejected his request to increase crude production faster, Energy Secretary Jennifer Granholm said Friday on Bloomberg TV, confirming multi-week speculation the administration would consider such a move.
But traders are cautioning that oil prices may not drop as much as the White House might want them to as a result of a release.
That’s because a release from the government reserve might be a sour crude grade. These highly sulfurous crudes have fallen out of favor with refiners because they require additional processing, which require expensive natural gas. As of Oct. 29, the SPR has a total of 612.5 million barrels of crude stored across four sites. Of that, only about 40% is sweet crude.
It also might not be enough oil to make a huge dent. After accounting for mandatory sales pre-approved by Congress and a minimum level required at the storage sites, the Biden administration likely has the ability to release a maximum of 60 million barrels, according to a person at one of the world’s biggest oil trading firms who asked not to be identified because the information isn’t public. That’s a little more than three days’ worth of average U.S. consumption, given 2020 levels.
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