Q&A of the Day – US Strategic Petroleum Reserve 

Today’s entry: Hi Brian, I want to run something by you. The US government has been selling millions of barrels of oil in order to soften the worldwide price increase. I am estimating that the sales will produce about $15-20 billion (approx 250 million bbl sold) in increased revenue. Shouldn’t this money be returned to the people whose money was used to purchase it? (ie, taxpayers). It’s not a large amount per taxpayer (about $100), but I feel that the principal requires it to be returned to us who funded the original purchase. 

Bottom Line: Right, so there are many considerations in play as we evaluate President Biden’s most recent announcement on oil releases this week. Is the president’s announcement of a release of 15 million barrels, ahead of his previously announced schedule, purely a political play three weeks in advance of the midterms? Will it really have a meaningful impact at the pump anyway? Is US national security compromised with the lowest oil reserves since 1984? And you’ve introduced another one. Where does this money go once the oil is sold?  

In addressing each of these questions which are part of the overall story, there are clear answers to these questions, save one. The first. Yes, President Biden said on Wednesday that this most recently timed announcement, just three weeks before election day, wasn’t political. That it was just his latest effort to “push” on what he’s been “pushing on”. Apparently, what he’s missing is Salt-N-Pepa, because he hasn’t learned how to do it real good. You can certainly make your own assessment about what’s going on here from a point of political expediency. On the question of whether it’ll have an impact at the pump, that’s been consistently clear. I’ll take you back to my initial reporting on Biden’s releases in late March after the announcement that he’d be releasing a million barrels of oil per day... 

In my story entitled: Oil releases Have No Impact on Today’s Prices & Why They Don’t Work, I said this... I could give you a detailed historical perspective of how this policy has failed previously, however you need look no further than the most recent one which will illustrate the point with an example that’s fresh in your brain. On November 24th President Biden announced the release of 50 million barrels of oil from the Reserve to attempt to achieve lower prices. The price of US crude was $72 at the time he released the oil on December 16th. The 50 million barrels represents the equivalent of 50 days' worth of releases under the policy which starts next month. 50 days from the release in December was February 3rd. The price of oil on February 3rd was $90. A 25% price increase in 50 days with 50 million barrels of oil being released from the Reserve by the Biden administration. I’ll spare you any additional macro-economic discussion by leaving it there. That example speaks for itself. The bottom line is Biden is doubling down on bad policy that’s already failed under his administration. As long the US is importing millions of barrels of oil per day from often hostile foreign actors, we’ll remain at the mercy of their actions – at least as much as our own.  

And so, to the very facts and points which I illustrated over six months ago, when President Biden began drawing down on our strategic reserves, oil was at $72 per barrel. Today, eleven months after releases began, it’s at $87. Any questions? And then there’s the question as to whether the US is compromised by the huge drawdown on our reserves which exist for the sole purpose of having the needed energy on hand in the event of a national emergency. The answer is overwhelmingly yes, at least to the extent that oil factors into our national security. It’s been widely reported that the Stategic Petroleum Reserve is being drawn down to the lowest level since 1984. However, that’s only part of the story.  

In 1984, the United States averaged oil consumption of 15.6 million barrels of oil per day. Most recently we’re using 19.8 million barrels per day. In other words, while our reserves are back to 84’s levels, our energy consumption is 27% higher today – making the ‘84 comparison not at all applicable. The drawdowns relative to US consumption are the lowest since the United States first fully established the Strategic Petroleum Reserve. In fact, while the US is the 3rd most populous country in the world, with the highest oil consumption in the world, our reserves are now only the 11th highest in the world. The United States is now as energy vulnerable as we’ve been post-World War II. And then there’s your question today. Where do the proceeds from these sales go? 

It’ll probably not surprise you to know that the federal government, which has over $30 trillion in debt, is quick to spend these related proceeds. In fact, last year’s infrastructure law included partial funding from the sale of the strategic reserves. As part of that law, money from future sales was also to be used to modernize the SPR. That’s the other dirty legal secret about these oil sales. The record spending by congress over the past couple of years has banked on steady sales of oil in many instances. These oil sales aren’t just part of Biden’s effort to attempt to temporarily manipulate energy prices here at home, while limiting our country’s ability to produce and distribute energy within it. It’s been funding, in small part, his broader political agenda.  

Each day I feature a listener question sent by one of these methods.  

Email: brianmudd@iheartmedia.com  

Gettr, Parler & Twitter: @brianmuddradio  

iHeartRadio: Use the Talkback feature – the microphone button on our station’s page in the iHeart app.     

Gasoline tanks in an oil refinery

Photo: Getty Images

Sponsored Content

Sponsored Content