Strategic Petroleum Reserve (SPR)

Investment Analysis Clubs Macro Economic Trends and Risks
1

Heard this on a TV show last night, but haven’t seen any news about it. It has a huge macroeconomic impact.

Summer of 2022 gas prices jump to $5/gallon as oil heads to $100/barrel.

US ask Saudis to open the spigots to help with demand.

Crickets.

US opens the SPR spigot and sells 180 million barrels of oil at $100/barrel.

Increased supply causes prices to go down to $70/barrel,

US buys back the oil for the SPR at $70/barrel, creating over $5 billion surplus (180m x $30).

Pros:
Create a $5 billion surplus for the US
Maybe the Saudis will be a bit more receptive next time
Saudis aren’t the only country that can control oil prices

Cons:
The SPR is for strategic reasons, not to turn a profit
What is a war broke out and we needed the oil?
What if, despite our maneuvers, oil prices kept climbing?

Of course, the US is the largest supplier of oil in the world, producing about twice as much (21.9m barrels/day) as #2, Saudi Arabia (11.1 mbd). But we also consume more (20 mbd) than even #2 consumer China (15.1 mbd).

Also heard that for the first time this century, Russia’s largest gas company, Gazprom, showed a loss. A $6.9 billion loss. I wonder if that’s connected to this?

Just curious what other folks think of this. Or was there already a thread on this I missed?

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Had not heard about the SPR being replenished, at an advantageous price.

What we did hear about this year was the admin selling off gasoline from a reserve in the northeast. Paid about $3.65/gallon around Memorial Day. Now the same station is selling at $3.33. Funny how that works.

Steve

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Did we actually buy back the oil at $70 or did we just talk about doing so?

4

Great question. I finally found a link to the show, which I can’t post here because of rules (originally posted from memory).

The US has only repurchased a portion of the amount they sold, so the surplus is $500+ million, NOT over $5 billion that I originally stated.

This was clearly my mistake, apologies.

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5

The EIA tracks the SPR levels. As of March, the SPR has not been replenished in a significant way.

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Data from here.

In January of 2022, right before the start of the Ukraine war, there were 588 million barrels in the SPR. In January of this year, there were 358 million barrels, so a 230 million barrel reduction.

They recently announced an intention to purchase 6 million barrels this year, but they need to make more such purchases to get the SPR back to where it was. In the following link, it says there are “currently” about 370 million bbl, which is close to where it was in March of this year.

~ ~ ~ ~ ~ ~

More up-to-date numbers here. As of May 31, the SPR had 370.2 million bbl.

  • Pete
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Thanks Pete! When I searched I could only find numbers from early 2023.