On March 11, President Trump announced plans to release 172 million barrels of crude oil from the U.S. Strategic Petroleum Reserve. The move is part of a coordinated response by the 32 member nations of the International Energy Agency to add 400 million barrels of supply to partially offset the disruption in shipments from the Middle East due to the war in Iran.
One fifth of the world’s crude oil supply transits through the Strait of Hormuz, the only waterway between the Persian Gulf and the open ocean. Iran has successfully halted most marine traffic through the strait, constraining oil supplies and driving crude prices sharply higher. The releases from the strategic reserves are intended to mitigate the price shock and the inevitable pain at the gas pump.
Yet news of the additional supply has had little effect. In fact, crude oil prices rose an additional 15% in the week following the announcement. The immense scale of the global energy infrastructure dwarfs the effect of the planned releases, particularly since they will be spread over roughly 4 months. And given the resurgence of American energy production over the past decade, the entire concept of a strategic reserve is less meaningful in 2026.
In the wake of the 1973 OPEC oil embargo, a group of western nations created the International Energy Agency to coordinate responses to supply disruptions. The agency, ratified by a formal treaty, calls on its members to maintain an inventory of at least 90 days of net oil imports and provides for collective response to oil shocks. The United States formally created the Strategic Petroleum Reserve in 1975 to comply with its obligation. The first delivery took place in July 1977 with the receipt of 412,000 barrels of Saudi crude. Today it is the world’s largest supply of emergency oil.
With a total capacity of 714 million barrels, the reserve currently holds 415 million barrels stored in 61 salt caverns in Louisiana and Texas. Salt domes have proved to be the most economical and environmentally friendly way to store large quantities of oil and natural gas, as salt does not react with petroleum and has self-healing properties that seal any microcracks in the salt walls. A typical storage cavern measures 200 feet in diameter and up to 2,550 feet in depth, enough to hold two Empire State buildings (minus the spires) end to end. The caverns are formed by injecting water and pumping out the resulting brine as the salt dissolves, a process known as solution mining which allows for great precision in creating the cylindrical storage voids.
Oil is removed from storage by pumping fresh water into the bottom of the cavern. Since oil floats on water, the volume of water injected displaces the oil and forces it to the top for extraction. The oil is then transported by a network of pipelines or tanker ships connecting the storage facilities with American refineries.
The timing of releases from the reserve pool is limited by physical constraints. At full capacity, the maximum discharge rate is about 4 million barrels per day. But this flow rate decreases as the volume of stored oil declines. That is why the planned 172 million barrels will require about 120 days to complete, or 1.4 million barrels per day. The U.S. currently consumes about 21 million barrels daily.
But crude oil is a global commodity, and pricing is based primarily upon supply and demand in the worldwide market. An additional 400 million barrels may seem like a large boost, but with global demand of over 100 million barrels per day, the release amounts to less than 4 days of supply spread over 4 months. Barely a blip on the screen. This additional 3 million barrels per day of supply falls far short of replacing the roughly 10 million daily barrels stuck behind the Strait of Hormuz.
A release of this magnitude is not unprecedented. President Biden authorized a 50 million barrel drawdown in 2121 and another 180 million in 2022, cumulatively reducing the stockpile by 42%. President Trump’s action will reduce the already lower reserve by another 41%.
The intent of the reserve is to provide emergency supplies in times of economic, environmental or geopolitical crisis as authorized by the President. There have been 4 prior emergency releases since the 1991 Iraq war. The Secretary of Energy is also authorized to make smaller loans of oil to counter short-term supply disruptions at US refineries. And Congress has dipped into the cookie jar several times, mandating sales from the strategic reserve as a budget gimmick to mask shortfalls from deficit spending bills. Talk about an oil slick.
While it is true that U.S. is now a net exporter of energy, the U.S. Energy Information Agency includes both crude oil and “petroleum products” like natural gas liquids in its reporting. Yet America still imports 2.2 million barrels of crude oil a day for purely economic reasons. Since most of our refineries were built 30 years ago to process dense, high sulfur oil from the Middle East, it is still cheaper to import this heavy “sour” crude to refine and to export the lighter, lower sulfur (“sweet”) domestic oil that commands a higher market price. About 70% of our imports now come from Canada and Mexico.
Drawing down 172 million barrels would cause the strategic reserve to drop to around 110 days of net imports, comfortably above the 90 day threshold. There are also around 450 million barrels in storage tanks owned by commercial producers and refiners, which also count toward the buffer. It simply isn’t likely to make much of a difference.
The creation of the strategic reserve made perfect sense when the U.S. and its allies were heavily dependent on imported stocks from OPEC. That is no longer true, and the urgency of a large reserve seems much less obvious, as even substantial releases from these reserves have little impact on global oil prices during times of significant geopolitical risk.