America's emergency oil is running out

The US Strategic Petroleum Reserve (SPR) has fallen to its lowest level since 1983, according to Department of Energy figures. After months of emergency releases to ease the Hormuz crisis, the country's strategic stock of oil is close to empty.

Half a century of cover, spent

Congress created the SPR in the 1970s as the nation's last line of defence against foreign oil embargoes. Successive administrations have drained hundreds of millions of barrels from it to hold down petrol prices before elections and during geopolitical crises. The salt caverns of Texas and Louisiana now hold barely thirty days' cover for net imports. The cushion that helped America ride out energy shocks for fifty years has been sold.

The reserve was authorised by the Energy Policy and Conservation Act of 1975, in the wake of the Arab embargo, and the first oil went into the caverns in 1977. It is stored at four sites, two in Texas and two in Louisiana, in caverns hollowed out of underground salt domes, which are cheap to build and keep the crude stable for decades. At its peak around 2010 the reserve held more than 700 million barrels, close to its design capacity.

How the reserve was run down

The decline was a series of decisions, each defensible at the time. Presidents released oil during the Gulf war in 1991, after Hurricane Katrina in 2005 and during the Libyan civil war in 2011. From 2015 Congress wrote mandatory sales into several budget and spending laws, treating the reserve as a source of revenue at a time when American shale output was booming and the risk of an embargo seemed remote. In 2022, after Russia invaded Ukraine, the administration sold 180 million barrels, the largest release in the reserve's history, and by 2023 the stock had already fallen to its lowest level in four decades.

That earlier low is part of the story. The reserve entered this crisis only partly refilled, because repurchases after 2023 were slow and limited by cavern maintenance and budget constraints. The emergency releases of the past few months have therefore drawn down a buffer that was already thin, taking it back to a level last seen when the reserve was still being filled for the first time.

Why the thinking changed

The shale revolution altered the calculation. The United States has been a net exporter of petroleum on an annual basis since 2020, and the International Energy Agency's requirement to hold 90 days of net imports applies only to members that are net importers. Many in Washington concluded that a country producing more oil than it consumed no longer needed a large emergency stock. The flaw in that reasoning is that oil is priced globally, and American drivers pay world prices whether the crude is domestic or imported. The reserve's value lay as much in damping price spikes that reach every pump in the country as in guaranteeing physical supply.

Physical supply still matters for particular refineries. Many plants on the Gulf Coast were built to process heavier, sour crudes rather than the light oil that shale produces, and the reserve holds a substantial share of sour crude for that reason. When imports of those grades are disrupted, the reserve is one of the few domestic sources that fits those refineries' needs.

Refilling at $100 a barrel

Refilling the reserve would take decades of steady spending and purchases of crude at spot prices above $100 a barrel. For now, the caverns are largely empty.

The arithmetic of refilling is unforgiving. Every barrel bought at crisis prices costs the Treasury more than it did when sold, reversing the gains the government made by selling high in 2022 and buying back lower afterwards. Purchases also add to demand in a tight market, pushing prices higher still, which is why energy officials are reluctant to buy while the shortage lasts. Physical limits add to the delay, because the caverns can take in oil only at a limited rate and some sites need repairs after years of heavy use.

Winners and losers from an empty reserve

Domestic oil producers gain in one sense: without government barrels competing in the market, they capture more of any future price spike. Holders of commercial inventories gain for the same reason. The losers are drivers and refiners, who lose the government's ability to cap price spikes, and the Treasury, which faces a large bill to rebuild the stock. Allies lose something too, because coordinated IEA releases have relied on American barrels as the largest single contribution.

The case for letting it shrink

The strongest counterargument is that the reserve did what it was meant to do. It was built to be used in an emergency, and a closure of Hormuz is exactly the emergency its founders feared. Releasing oil to cushion the shock was a better use of the stock than letting it sit idle while prices soared. The weakness in that view is that the reserve was already depleted by sales unrelated to any emergency, so less was available when the real one arrived.

The signals to watch are the weekly inventory figures published by the Energy Information Administration, any appropriation from Congress for repurchases, the Department of Energy's solicitations to buy crude, and the price of oil relative to past purchase levels. With the SPR at its lowest since 1983, the next Middle East supply shock will fall straight on American drivers and refiners, and refilling the caverns is unlikely to start while oil costs more than $100.