As the Western world continues to act to cut off Russia’s ability to sell oil and gas in the wake of its invasion of Ukraine, there is recognition of the fact that this will cause pain to the sanctioners as well as the sanctioned. In response, the United States has already decided to release 30 million barrels of oil from the Strategic Petroleum Reserve (SPR). Though it seems like this is precisely the sort of event that should lead to a release from the SPR, the truth is that this isn’t even close to the largest release authorized over the past year.
As part of the bipartisan infrastructure bill passed by Congress in November of last year, the SPR was authorized to draw down and sell off over 87 million barrels of crude oil, a sale that allowed Congress to offset $6.1 billion of the cost of the bill. Never mind that any drawdowns from the SPR must be replenished, meaning that SPR sales end up being about budget-neutral — in its foolish attempt to make government math work for the infrastructure bill, Congress authorized the sale of an amount nearly three times as large as it has thus far in response to essentially cutting off oil imports from a major global supplier.
Of course, if you’re wondering why gas prices kept climbing even after the infrastructure bill passed in November, it’s because no oil has been released from the SPR yet as a result of that legislation. In fact, the Infrastructure Investment and Jobs Act does not authorize the SPR to release any oil until FY 2028 at the earliest.
The reason is simple: Congress was treating sales from the SPR as a way to claim that the infrastructure bill was “paid for,” not for any “strategic” purpose. It was hardly the only gimmicky offset used in the passage of the infrastructure bill, but it is the one that poses the greatest risk to energy security, as Americans are now finding. Since Congress’s legislation is “scored” by official budgetary scorekeepers over a ten-year budget window, revenue from SPR sales can be used to offset the cost of spending so long as it is set to come in less than ten years in the future.
A cavalier attitude towards the SPR is not unique to any one party. In recent years, the SPR has been treated more and more casually as American energy independence improved and a major conflict seemed less likely. Drawdowns from the SPR were authorized in part to offset the cost of unrelated legislation in 2015, 2016, 2017, three times in 2018, and 2020.
Yet recent events show that this thinking is mistaken. Russia supplied around 7 percent of American oil consumption in late 2021, and was the second largest global oil exporter behind only the United States. To an oil and gas market that is already suffering from supply-chain induced shortages and price hikes, the loss of Russian oil is going to cause pain to the global economy.
The SPR, meanwhile, is authorized to hold over 700 million barrels of oil, but last reported having just over 580 million before President Biden’s authorization to draw down 30 million barrels. To put that in perspective, the United States consumes about 18 million barrels of oil a day, while the EU consumes a similar amount and is even more dependent on Russian oil imports.
In this context, it is painfully clear that the SPR needs to be treated far more seriously. Drawdowns from the SPR to pay for legislation not only decrease the nation’s capacity to respond to oil shocks and limit our ability to use economic measures against foreign aggression by oil producing-countries, but they don’t even truly provide “revenue.”
Congress should amend its careless attitude towards the SPR, and should consider instituting additional safeguards to prevent the SPR from being drawn down for frivolous purposes unrelated to energy security for everyday Americans. An emergency stockpile of energy reserves does little good if it is used up for non-emergency purposes.
