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Gas Prices Soaring: Could the Strategic Petroleum Reserve Offer Relief?
Across the nation, American motorists are feeling the pinch at the pump, with gas prices jumping approximately 20% since the onset of the U.S. conflict with Iran. Experts are now pointing to a potential solution to ease these rising costs: tapping into the Strategic Petroleum Reserve (SPR), the country’s emergency oil stockpile designed to mitigate supply shocks.
As of Tuesday, the average price per gallon reached $3.54, a notable increase from roughly $2.92 just a month prior, according to AAA. This surge is largely attributed to disruptions impacting oil tankers navigating the Strait of Hormuz, a critical waterway responsible for transporting about one-fifth of the world’s daily oil supply.
President Trump has been actively working to reassure shippers about the safety of the Strait of Hormuz. Last week, he announced that the U.S. International Development Finance Corporation, a lesser-known government agency, would provide insurance for vessels traversing the Persian Gulf.
Further calming markets, President Trump declared the war with Iran “very complete” in an interview with CBS News on Monday. This statement led to a dip in oil prices, which fell from nearly $100 per barrel on Monday to $88.15 on Tuesday.
Despite this decrease, crude oil remains significantly higher than its pre-war range of approximately $70 per barrel. The White House has also informed CBS News that it is exploring “all credible options” to bring down gas prices.
While tapping the SPR could offer some relief, energy analytics firm Wood Mackenzie noted in a March 10 report that it “cannot fully offset the supply loss” resulting from the Strait of Hormuz disruptions.
Here’s a closer look at the SPR, a network of salt caverns in Texas and Louisiana capable of holding up to 714 million barrels of crude oil:
What is the Strategic Petroleum Reserve?
Established in 1975 under the Energy Policy and Conservation Act, the SPR was conceived as an economic “insurance policy” in response to the 1970s energy crisis, explained Kevin Book, managing director of ClearView Energy Partners. Its primary purpose is to release oil to refiners facing supply shortages.
The SPR is specifically designed to address temporary disruptions to the nation’s oil supply, such as those caused by natural disasters. However, Bernard Yaros, lead U.S. economist at Oxford Economics, cautions that if the current conflict is prolonged, the SPR cannot be a sole long-term solution.
Analysts suggest that a coordinated release of oil, involving other nations with their own stockpiles, would likely have a more substantial impact on prices. “When you have the U.S. doing this in coordination with Asia and Europe all tapping into stockpiles at once and guiding markets that they’ll continue to release stocks of oil to fill the supply hole left by the conflict, that’s where you get more bang for your buck in terms of the effect on prices,” Yaros stated.
However, finance ministers from the Group of Seven (G7) – comprising the U.S., Canada, Japan, Italy, Britain, Germany, and France – indicated on Monday that they are not yet prepared to release their strategic oil reserves. A G7 official familiar with the discussions told Reuters that while there was no opposition, “more analysis is needed” regarding the timing.
Where is the SPR Located?
The SPR consists of four underground storage sites situated in Texas and Louisiana, strategically positioned near approximately half of the nation’s refining capacity, according to Book.
How Much Oil Does it Hold?
These storage facilities have a maximum capacity of 714 million barrels of crude oil. Currently, the SPR holds 415 million barrels, as reported by the U.S. Department of Energy.
When Was it Last Tapped?
In 2022, the Biden administration authorized the release of approximately 200 million barrels of crude from the SPR in an effort to curb gas prices that had reached $5 per gallon. This marked the largest SPR release in U.S. history. Previous instances of tapping the reserve include the 1991 Gulf War, Hurricane Katrina in 2005, and the war in Libya in 2011.
Can the SPR Effectively Lower Oil and Gas Prices?
While the SPR can offer some relief, its impact may be limited given the extensive disruptions to oil shipments caused by the Iran conflict. Petroleum analyst Patrick De Haan noted that roughly 20 to 25 million barrels of oil pass through the Strait of Hormuz daily. Even if the U.S. were to deplete the entire SPR, it would only equate to about three weeks of shipments through the strait.
“Using the SPR could temporarily soften prices, but it would not solve the underlying problem – and once the oil is gone, the United States would be more vulnerable to future disruptions,” De Haan warned.
Furthermore, immediate relief from tapping the SPR is unlikely, as it takes approximately 13 days for oil from the reserve to reach the market, explained Sasha Foss, an energy analyst at CSC Commodities. There are also daily limits on the amount of oil that can be released.
Nicholas Mulder, a Cornell University history professor specializing in the economic impacts of wars and sanctions, emphasized, “The SPR can help, but it’s not a silver bullet, and it’s not going to take away all the pressure on consumer prices. The war is driving up prices on the world market, and there isn’t an easy way out.”
According to energy market expert Adi Imsirovic, the most effective way to lower oil prices would be to reopen the Strait of Hormuz and ensure its safety for tankers. He suggested that providing war insurance could encourage some ships to resume transit, thereby increasing shipping movement.