With the U.S. Strategic Petroleum Reserve falling short, the nation holds fewer instruments to combat rising fuel prices. Since the U.S. and Israel entered conflict with Iran in late February, the Trump administration has drawn upon the stockpile repeatedly in an effort to increase fuel supplies. Prices for gasoline remain elevated, while diesel stands at a record high, and the reserve itself has diminished by more than 30% over the span of six months.
What the Reserve Actually Is
Huge underground salt caverns in Louisiana and Texas hold hundreds of millions of barrels of crude oil kept for emergencies. That crude later gets turned into gasoline, diesel and other everyday goods. The purpose of the Strategic Petroleum Reserve is to work as a buffer against sudden oil shortages, so the government has a lever it can pull to ease high gasoline prices whenever necessary.
The conflict with Iran has altered the situation. A stockpile that stood at roughly 415 million barrels of oil in February now sits below 285 million barrels — its lowest point since the early 1980s.
Why the Drawdown Hurts the Caverns
As the pace of oil extraction rises, so too does the risk to the very caverns holding the reserves. Samantha Gross, who directs the energy security and climate initiative at the Brookings Institution, a nonpartisan policy think tank, warns that the physical facilities can get degraded as the reserves get lower.
“You can damage them by pumping too much out of them,” Gross says.
The war has created an economic danger too. Prior to hostilities breaking out, global oil reserves were abundant, with large volumes of crude moving by sea across the world’s oceans. Most of that supply has now been consumed. The price of Brent crude, which serves as the global benchmark, continues to sit above $100 a barrel — 47% more than it was at the start of the conflict.
What the Administration Has Already Done
A number of steps have already been taken by the Trump administration aimed at bringing prices down. The Jones Act was temporarily suspended so ships could more easily carry fuel to U.S. ports. At the same time, gasoline producers were permitted to begin selling their “winter blends”, which cost less to produce, somewhat ahead of schedule this year.
Ben Cahill, a non-resident senior fellow at the Atlantic Council where he covers the global energy sector, says those buffers no longer exist.
“A lot of the things that got us through the last six months, all those buffers, have really been worn away,” Cahill says.
The Venezuela Deal
The federal government took a majority stake in 17 Venezuelan oil fields through a late-August arrangement between the Trump administration and an oil company operating there. According to the White House, the new deal was meant to guarantee “a stable supply of low-cost oil that can facilitate refilling the Strategic Petroleum Reserve.”.
Chris Wright, the U.S. Secretary of Energy, made clear on CNBC that the strategy did not involve filling up the American reserve with oil from Venezuela. Rather, he indicated the United States could trade its own barrels for those of Venezuela.
Crude oil comes in many forms, and Venezuela’s oil tends to be heavy and dense, containing a great deal of sulphur. Carl Larry, who runs operations at Enverus, an energy data and research provider, notes that lighter crude is simpler to work with when making gasoline and diesel.
“It’s this heavy, goopy, thicker than molasses stuff,” Gross says, “That’s not necessarily what you want to put in these caverns.”
The Problems With the Swap
Even if the U.S. wants to do a swap for Venezuelan oil, much of the new production won’t happen anytime soon. Some of the 17 oil fields under discussion are new and will need to be developed from scratch. Others will need re-investment and redevelopment.
“You need to literally make the holes on the ground and insert cement and piping and build all the infrastructure,” Jorge León, head of geopolitical analysis at research firm Rystad Energy, says.
Some oil fields sit so far from existing infrastructure that it takes more than a decade before oil begins flowing. Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute at Rice University, says the timeline runs from 10 to 20 years.
“I wouldn’t say ‘never,’ but say 10 to 20 years,” Monaldi says.
The crude being discussed in the U.S. arrangement comes from what’s known as the Faja Venezuelan oil, a heavy substance that behaves more like peanut butter and will prove hard to draw from beneath the surface. The firm the U.S. has partnered with for this venture is Barbados-headquartered North American Blue Energy Partners, or NABEP.
The company told NPR by email that its engineering staff brings decades of experience, citing its work in the PetroCedeno and Junín Sur fields within the Faja. It also pointed out that output from NABEP’s current holdings has grown tenfold over the last two years.
What China Can Teach Us
Antoine Halff, a non-resident fellow at Columbia University and an oil market expert, argues that the United States can learn from China’s management of its strategic reserves. China holds the world’s largest oil stockpiles and has drawn on them since the Iran war began in February.
China is deriving less of its oil demand from domestic consumption because the country’s expanding fleet of electric vehicles, including cars, trucks and scooters, is reducing the need for crude. According to the International Energy Agency, electric transport has already displaced at least 1.5 million barrels of oil a day in China.
“To manage market disruption risks, China shows it pays”
The Bottom Line
America has drawn down its emergency oil supply to fight a war with Iran, and now the stockpile sits almost bare. The arrangement with Venezuela appears sound on paper, yet the crude will take years to reach American shores. By then, the country might no longer require it — electric vehicles are already reducing oil consumption in China.
Drivers paying record-high diesel prices have a clear takeaway: the government’s safety valve is partly shut down. The nation relies on whatever oil the market generates, and the cost of fuel shows it.
Americans were promised that the Strategic Petroleum Reserve would shield them from costly gas prices. Instead, it sits almost bare, with no fast solution coming any time soon.
Timeline of Key Events
| Date | Event |
| — | — | — |
| Late February | U.S. and Israel enter conflict with Iran |
| February | Stockpile stood at roughly 415 million barrels of oil |
| Late August | Trump administration and oil company arrange majority stake in 17 Venezuelan oil fields |
| Now | Stockpile below 285 million barrels — lowest point since the early 1980s |
| Now | Brent crude above $100 a barrel, 47% more than at the start of the conflict |
| Now | Electric transport displaces at least 1.5 million barrels of oil a day in China |
Steps Already Taken
- Jones Act suspended to allow ships to carry fuel to U.S. ports
- Gasoline producers permitted to sell winter blends somewhat ahead of schedule
- Trump administration takes majority stake in 17 Venezuelan oil fields
Source material: “The U.S. Strategic Petroleum Reserve is low. Here’s why you should care,” Houston Public Media.
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