Since the creation of the Strategic Petroleum Reserve in the mid-1970s, America has never been backed into such an energy corner as we’re in now, thanks to the Biden administration selling off much of our oil reserve to countries like China.
It’s an invisible trap about which most Americans are oblivious, but it has everything to do with inflation, recession and national security. Americans may soon feel the pain of rising prices, supply shortages and a faltering economy, if OPEC, Russia and China succeed in taking advantage of our suddenly depleted energy stockpile.
Under President Joe Biden, this drawdown of our reserve oil masks political problems he blames on Russia. But that dog won’t hunt. Let me explain:
Recall that it took just one year after Biden became president for Russian President Vladimir Putin to invade Ukraine. Putin had also seized parts of Crimea during the years when Barack Obama was president.
Putin held his Ukraine ambitions in abeyance during the four years of President Donald Trump. Love him or hate him, Trump was the president with whom Putin did not want to mess. For four years, the United States was strong enough to stall the expansion plans of the Russian strongman until that fateful day when American voters evidently elected a man who would hardly leave his basement to campaign for president.
For Biden, the price of oil doubling under his administration was a serious problem starting in 2022; the Strategic Petroleum Reserve was his solution to keep Americans calm after the price of gas had doubled quickly last year.
Thus, oil poured forth from the strategic reserve month after month, invisibly suppressing the supply problem Biden was creating with his other anti-oil policies. Much of that oil sold by the Biden administration went to companies that were middlemen for China.
How much oil? You can practically hear the echo in the salt caverns. Last year, the Department of Energy sold off over 180 million reserve barrels. This was about 21 gallons of crude oil for every man, woman and child in America.
In one year alone, the Biden administration drained nearly a third of what was in the emergency reserve and has more sell-offs on the schedule. The administration says its efforts have lowered gasoline prices by 17-42 cents over what they would be without this action.
The reserve, which can hold 714 million barrels of oil, was meant as a deterrent to adverse actions by OPEC, and is supposed to help give the country a leg up in foreign policy.
But now, with just 346 million barrels left, OPEC and its sidecar Russia can read the charts: The United States has not only run through its emergency supply, it doesn’t allow enough domestic oil to be developed to meet its own needs.
Military power is one toggle on the global geopolitical chessboard and the U.S. still has that — we hope. Oil production is another big player, and in a way, is the Queen with more moves.
The opposing players have announced their next moves: Saudi Arabia cut oil production by one million barrels a day, effective July 1.
Russia, still under oil sanctions by major Western countries, has moved its oil across the oceans in spite of sanctions. Before the G7 changed the export rules on Russia to western world countries in 2022, Russia exported 33,000 barrels of refined product to the African continent per day. By March of 2023, it had built that to 420,000 barrels per day to Africa.
Russia’s oil continues to trade above the $60 price cap set by the participating embargo countries back in December. In July, Russian Urals crude oil futures breached the $60 limit and is now trading over $63, about where it stood at the time Russia invaded Ukraine and before the G7 sanctions were announced.
To drive prices higher still, Russia will now reduce oil exports by 500,000 barrels per day starting in August, the same time Saudi Arabia is scaling back.
Thus, price caps on Russia had only had a temporary effect.
As the chess pieces move around the board, President Biden will be forced to purchase oil to refill the Strategic Petroleum Reserve at higher prices than the price at which he sold reserve oil to China last year. Or, he simply may not replenish the supply and hope for the best.
Hope is a bad strategy. The storage caverns are half empty. With America using 20 million barrels a day, we’re down to a 17-day supply of emergency oil.
The Biden Administration has backed us into a corner, and Americans should hope and pray for a warm winter, because the price of heating our homes may be more than we can afford in January.
Suzanne Downing is publisher of Must Read Alaska.
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