US Releases More Strategic Oil as Diesel Prices Cross
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The U.S. Department of Energy has announced plans to release an additional 40 million barrels of crude oil from the Strategic Petroleum Reserve (SPR). This move comes as fuel costs remain high nearly seven months into the war in Iran.
This latest release, structured as an exchange, represents the final portion of the 172 million barrels the U.S. committed to provide as part of a coordinated emergency response coordinated by the International Energy Agency (IEA).
As of late August, the SPR held 286.6 million barrels, following a weekly decline of 3.1 million barrels. This current level sits more than 445 million barrels below the reserve’s maximum capacity. Meanwhile, commercial crude inventories have also shrunk, dropping by over 48 million barrels over a 20-week period ending September 1, despite the ongoing flow of emergency oil from the SPR.
Under federal regulations, non-emergency drawdowns are restricted once SPR levels drop below 252.4 million barrels. Additionally, a 1981 report from the Government Accountability Office recommended avoiding releases below 250 million barrels unless a severe emergency occurs. Following this latest release, the reserve is projected to reach its lowest level since 1982.
High fuel prices continue to pressure consumers, with U.S. gasoline averaging over $4 per gallon and diesel climbing past $6 per gallon due to tight distillate supplies and war-related disruptions. At the beginning of September, distillate stocks were 14% below the five-year average, and gasoline inventories were 6% below typical seasonal levels.
In response to the tight global market, Energy Secretary Chris Wright urged European allies to fulfill their own emergency stock commitments, noting that several IEA nations have only released a small portion of their pledged volumes.
Rather than a direct sale, this 40-million-barrel release is structured as an exchange. Companies that receive the crude must return equivalent volumes at a later date, along with extra barrels as interest. The Department of Energy anticipates that this exchange framework will eventually return approximately 200 million barrels to the reserve.
Bids for the exchange are due by October 6.
