Trump said he'll re-stock US oil reserves - but is it possible?

Recent comments made by former US president Donald Trump to immediately fill up the nation's Strategic Petroleum Reserve should he retake office not only carry negative economic implications but also seem highly unlikely given his former policies and the amount he needs to fill. The comments, which came during an interview with Fox News last week, downplay his record of tapping into the stockpile. Matthew Bey, senior global analyst at the RANE Network, believes the remarks are Mr Trump's latest attempts to court rural voters who lean towards nationalist ideas. “That's been a base that he's always tried to speak to for a decade now, so it's not new for him to reach out to them,” he said. “It's not that it's not possible,” he said, adding that he believes the comments are part of a broader attempt to receive support from rural voters who strongly support American energy independence. The Strategic Petroleum Reserve is the largest stockpile of emergency crude oil in the world and its contents are stored at four sites along the coast of the Gulf of Mexico. The US reserves are designed to mitigate short-term disruptions to the supply chain such as natural disasters. There are about 375 million barrels of oil in the reserve today after dropping as low as 347 million barrels last year, its lowest level since the 1980s. Kate Dourian, non-resident fellow at the Arab Gulf States Institute in Washington, said the SPR is “just over half of where it should be” but noted that filling it up depends on a variety of factors including price. “You're not going to be buying if the price is at 90, right? You're going to wait until it comes down.” Ms Dourian noted filling up the stockpile is not as straightforward as wanting to replenish it, but that the price point has to be acceptable for both the seller (the oil companies) and the buyer (the federal government). Potential geopolitical risks such as the threat of disruptions in the Strait of Hormuz could lead to an oil shock, but that scenario has not yet come. After seeing a modest increase in April, the price of Brent Crude oil has moderated to roughly $80 per barrel. Mr Biden has taken steps to replenish the stockpile after releasing about 180 million barrels of oil from it in 2022 to respond to soaring petrol costs because of Russia's invasion of Ukraine. The Department of Energy so far has purchased more than 40 million barrels to replenish the reserves, including a purchase of 4.65 million barrels last month at $77 per barrel. Mr Biden's administration also worked with Congress to cancel previously mandated sales of 140 million barrels from 2022. It is also seeking to buy another 6 million barrels from energy companies to help replenish the stockpile. The department earlier this year said it is seeking to purchase oil for up to $79.99 per barrel. Still, the Republican presidential nominee has accused his successor of threatening US energy security. During his Fox News interview, Mr Trump said Mr Biden is using the reserves simply to keep prices down at the petrol pump, where the reserves are meant for the military and times of war. But those remarks do not reflect the current state of US energy security, where the US produces more crude oil than any other nation at any time. While the US overtook Russia and Saudi Arabia as the world's largest crude oil producer during Mr Trump's administration, that gap exceeded during the Biden administration. Crude oil production in the US averaged 12.9 million barrels per day last year, breaking the previous record of 12.3 million barrels per day in 2019. “At the end of the day, oil production is a lot higher under the Biden administration than it was under his administration,” Ms Dourian said. Mr Trump's comments on US energy security also disregard the actions he took in response to an attack on crucial production fields in Saudi Arabia in 2019. At the time, Saudi Aramco said the closures would affect 5.7 million barrels of crude production per day. On September 15, 2019, Mr Trump said he authorised the release of oil from the US reserves “sufficient to keep the markets well-supplied”. The price of Brent crude surged to almost $72 before climbing back down to $66 per barrel after Mr Trump said he would release some of the US reserves. The SPR's level dropped by 57 million barrels by the time Mr Trump left office, rebuffing his claims that it was being “filled up a levels never seen before” during his watch – although most of the depletion was because of sales made by Congress mandated by law. The stockpile's capacity most recently peaked in 2011 at roughly 726 million barrels. Similarly, in 2022, when the price of Brent crude oil surged because of the war in Ukraine, Mr Biden tapped into the emergency stockpile. Other member nations of the International Energy Agency also agreed to an emergency release of their oil stocks. “There was a real fear at the time, if you looked at the idea of protection of how much we were going to lose in Ukraine war, which didn't really happen, but there was a sort of legitimate fear at the time that there might be a price shock,” Ms Dourian said. Mr Bey suggested US reserves should modulate prices during times of crisis such as the Ukraine war and the 2019 attacks on the Saudi compounds. “I'm not sure if Trump is really thinking about it in that way. I don't think he's really thinking very strategic about it,” Mr Bey said, noting Mr Trump is propping up his voters' views on American independence. While it is possible in theory to immediately fill up the SPR, the price tag attached to accomplishing this and his limited executive authority make it unlikely. Doing so would benefit oil companies' profit margins, but it poses a threat to market supply and costs. While immediately filling the SPR would benefit oil companies' profit margins, it poses a threat to market supply and costs. Leaning into such a message is a confusing one, Mr Bey said. Although the US would see its emergency reserves double, it would also increase oil demand, which could potentially increase the cost US drivers pay at the pump. It would also come with a significant price tag. If Mr Trump were to fill the US reserves to the brim, the US would need to purchase about 300 million barrels. With the price of Brent crude at about $80 per barrel, that would cost $24 billion. “Or roughly the equivalent of every single year at Nasa,” Mr Bey said. Even if Mr Trump were to follow through with immediately filling the US reserves in the event he retakes the White House, he would face significant hurdles. While the president has broad authority to release the reserves, US Congress has the authority to approve purchases to restore the strategic petroleum reserve. Mr Trump faced this reality in 2020, when a Democratic-controlled Congress rejected his proposal to purchase 77 million barrels – valued at $3 billion – because they said it would have been a subsidy for oil companies.

Trump said he'll re-stock US oil reserves - but is it possible?

The 2024 presidential candidate's plans to immediately fill up the Strategic Petroleum Reserve would come at huge cost