National Oil Reserves Hit Lows Not Seen Since 1984
Are our current energy resources sufficient enough to protect the security of the United States? According to YCharts, the reserves were around 638M on January 20, 2021, when Biden took office. Six months ago, in March, the Biden administration committed to releasing barrels from the national oil reserve. The commitment combats surging prices at the pump. “The move arguably worked, as US gas prices have been consistently falling since June from an average high of more than $5 per gallon to just $3.71 per gallon today,” Markets Insider. According to some sources, it’s not the only drawdown on reserves from the Biden administration.
The use of US reserve brings the inventory to its lowest point since 1984 (Reuters). “The Biden administration still has 30 million barrels to drawdown to meet its commitment from the 180-million-barrel-drawdown-executive-order that President Biden put into place on March 31st of this year,” said Tim Snyder, Economist at Matador Economics.
KEY POINTS:
● 1984: the last time the oil reserve was as low as it is now.
● The oil reserve has lost seven available days of crude oil.
● US gas prices have been consistently falling.
How does the national oil reserve impact security?
Snyder’s weekly publication breaks down the reserve into a formulation called “available days of crude oil”. It represents the number of days the US could sustain if production shut down and there was no crude oil to import”. On the day President Biden took office, there were 32.2 days of excess supply if everything shut down…the systemic drawdown of the country’s strategic reserves and available supply had dropped our number of excess supply to 25.94 days,” said Snyder. If the worst were to happen, the US would be down about a week’s worth of energy.
Steadying presence on the global market
America is a net exporter of energy. The Biden commitment to dip into reserves supports Europe during a precarious time of sanctioned energy. “Lobbyists for the US oil industry say that the global energy market would be worse off and have more volatility if it weren’t for the steadying presence of ‘American energy leadership,’” Business Insider.
The diminished barrels remain a significant concern. A lot could happen in a week. There are signs of changing tides. Multiple sources predict the drawdown commitment will end in October as planned (Markets Insider, Reuters). As prices dip to comparable in January, the Biden administration is weighing the option to replenish the reserve (Bloomberg).
Sorry, refills aren’t free.
“The energy resources we need to complete the recovery from the pandemic and to fully defend this country from others have been severely diminished. Our national security is at stake here, and our numbers are going in the wrong direction,” said Snyder. Replenishing the reserve is a logical response to concerns about security. No one feels good right after tapping their rainy day savings. But of course, every action has a ripple effect. While a significant commitment to purchase barrels would ease concerns about national security, it would likely set a new floor in the oil market.
