SPR

Today, we detail U.S. plans to release 172 MMbbl from the Strategic Petroleum Reserve, examine how it compares with U.S. actions after the Russian invasion of Ukraine in 2022, and why the SPR could drop to levels not seen since the Reagan administration.

Strategic Petroleum Reserve (SPR) inventories have been climbing for more than a year, but they could go much higher if President Trump has his way, as one of his major campaign promises was to refill the SPR “to the very top,” a goal he has repeated since his return to the Oval Office. Current inventories sit just below 400 MMbbl, leaving the SPR about 320 MMbbl shy of maximum capacity. But the refilling process may not be as straightforward as one might think, as three of the four SPR storage sites have experienced construction upgrades in the last year — which means things could go slower than anticipated. In today’s RBN blog, we’ll discuss the challenges of filling up the SPR and detail four scenarios for how the process might play out. 

The Biden administration has been on a mission for more than a year to restock the Strategic Petroleum Reserve (SPR), which was tapped at unprecedented levels in an effort to keep crude oil and refined product prices under control after Russia’s invasion of Ukraine in early 2022 disrupted energy flows globally. But if returning all of the released 180 MMbbl and replenishing the SPR to pre-war levels was the plan, they’ve got a long way to go. In today’s RBN blog, we examine the steps the administration has taken to replenish the reserve and the headwinds it faces.

The March appropriations bill passed by Congress and signed by President Biden to fund the federal government mandated the emptying of the federal gasoline reserve in fiscal year 2024, which concludes September 30, followed by its eventual closure. That means about 1 MMbbl — 42 MM gallons — of gasoline will find its way to the market in the next few months, or in as little as a few weeks. The Department of Energy (DOE) is planning to distribute those barrels by the end of June to help keep a lid on gasoline prices ahead of the July 4 holiday and into the heart of the summer driving season. In today’s RBN blog, we look at the decision to close the reserve and the potential impact of those barrels hitting the market. 

It seems like everyone has an opinion about the Strategic Petroleum Reserve (SPR), and everyone is at least a little bit right. For example, many assert the SPR provides a helpful crude oil supply buffer in the event of a major disruption from, say, a strong hurricane in the Gulf of Mexico or a war in the Middle East. Others say the market can take care of itself — the SPR just muddies the waters by getting government (and worse yet, politicians!) involved. Still others say the oil market has changed dramatically since the SPR was established almost a half-century ago and that the strategy behind the reserve should be revised in response to those changes. In today’s RBN blog, we discuss the very gradual refilling of the SPR after a big draining — and an ongoing debate about the reserve’s future.

Earlier this month, the price discount for Western Canadian Select (WCS) versus WTI at Cushing blew out to more than $30/bbl — 2.5x what’s typical and a signal that something was seriously out of whack. Well, it turns out that several things were — and to some degree still are — off-kilter, combining to drive down the price of Western Canada’s benchmark heavy-oil blend to its lowest levels relative to WTI in four years. The culprits? Everything from renewed pipeline constraints to a deadly refinery fire in Ohio to the aftereffects of Russia’s invasion of Ukraine, including releases from the U.S.’s Strategic Petroleum Reserve (SPR). In today’s RBN blog, we discuss the recent ups and downs in WCS pricing and the prospects for WCS-WTI differentials to return to a more normal range in the weeks to come. (Hint: This roller-coaster ride ain’t over.)

The swift increases in crude oil and gasoline prices that followed Russia’s invasion of Ukraine in February — and the sanctions that were implemented soon thereafter — spurred a lot of concern that the U.S. and global economies would go into a tailspin. In response, government officials here and abroad turned to their strategic reserves as a way to quickly balance the market and rein in prices while buying time for additional oil production to come online. But U.S. production growth and rig activity have hit a wall since June, when releases from the Strategic Petroleum Reserve (SPR) started to pick up steam, reducing the prospects for a significant output increase this year. In today’s RBN blog, we examine the changes in the market since the major withdrawals were announced, how the hoped-for bridge to higher oil production has so far failed to materialize, and why it’s unlikely the government will turn to the SPR if prices spike again soon.

It’s no secret that higher gasoline prices are a problem for a lot of folks, including everyday drivers, businesses and — maybe especially — the politicians who hear the complaints from the first two. Although prices at the pump have been trending higher for some time, they’ve really come to the forefront in the past several weeks following Russia’s invasion of Ukraine, which has stressed global energy markets and sent U.S. officials looking for any and all options to keep a lid on prices. In today’s RBN blog, we look at President Biden’s decision to allow the sale of E15 gasoline during the summer months, whether it’s likely to provide U.S. drivers significant relief from high prices this summer, and how global pressures are moving ethanol prices higher too.