The United States Strategic Petroleum Reserve (SPR) plummeted to its lowest level since 1983 last month, as escalating tensions between Washington and Tehran intensified concerns over global oil supply stability.
Data from the Department of Energy revealed that SPR fell by 6.2 million barrels in the week ending 3 July, leaving the stockpile at 319.5 million barrels. This figure marks a significant decline for the emergency reserve, which has a total storage capacity of 713.5 million barrels, reports Al Jazeera.
The market response was immediate. Brent futures climbed 5.2 per cent on Wednesday to settle at $78.02 a barrel, reaching their highest point since mid-June. US President Donald Trump acknowledged the volatility, telling reporters that oil prices jump whenever the US strikes Iran.
While the US is currently the world’s leading oil producer and a net exporter, experts warn that it remains vulnerable to global price shocks. Maksim Sonin, an energy executive at Stanford University’s Centre for Fuels of the Future, noted that “independence doesn’t mean price security” because oil is a globally traded commodity.
Disruptions to the Strait of Hormuz, a narrow waterway through which one-fifth of the world’s oil supply passes, force global buyers to compete for alternative supplies, driving up costs for US refiners and consumers. Although only 7 per cent of US-consumed crude travels through the strait, many key trading partners, such as India and South Korea, are heavily dependent on it.
The impact has already been felt at the pump. Following initial strikes on Iran in early March, the US government began tapping the SPR. Despite this, the American Automobile Association (AAA) reported that petrol prices rose from 0.79 per litre) on February 28 to 1.18 per litre) by mid-May.
Established in 1975 following the Arab oil embargo, SPR consists of crude oil stored in underground salt caverns along the US Gulf Coast. It is intended for “extraordinary circumstances” such as wars or natural disasters, having been utilised previously after Hurricane Katrina in 2005 and Russia’s invasion of Ukraine in 2022.
However, the sustainability of continued releases is in question. Abhi Rajendran, a fellow at Rice University’s Centre for Energy Studies (CES), warned that current export levels to balance the global market may not be sustainable.
He further cautioned that approximately 100 to 150 million barrels of the remaining stock might be unusable for current refiners due to its age and the condition of storage caverns.
Analysts suggest that a dwindling reserve limits the government’s ability to calm financial markets.
“The longer a crisis goes on, the less flexibility governments have with their strategic reserves,” Sonin added, noting that a refusal to release oil could signal to the market that a situation is more severe than expected, further compounding price spikes.
