(Joe Hoft) Last month, President Biden authorized his second emergency sale program with the release of one million barrels per day from the Strategic Petroleum Reserves (SPR) for the next six months (180 million barrels). The aim, according to Biden, is “to provide a wartime bridge that will support American consumers and the global economy in response to Vladimir Putin’s war of choice against Ukraine.” Biden’s ulterior motive is to have tens of millions of barrels diverted to Europe, encouraging the Europe Union to ban Russian oil while discouraging diplomacy.
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by Joe Hoft, May 6th, 2022
Europe uses 14.1 million barrels daily, of which the EU imports 3.8 million barrels from Russia (27% of EU requirements). Ursula von der Leyen, President of the European Commission and Global High Priestess, pledges a phase-in ban on Russian oil imports. Assuming Russia will cooperate over six months. The ban, in substance, is a self-inflicted embargo levied on Europe. Europe will require replacement sources from the Middle East, North Africa, and the US, creating a long supply chain using tanker shipments at a substantial higher cost.
Finally, we now propose a ban on Russian oil.
Let´s be clear: it will not be easy.
But we simply have to work on it.We will make sure that we phase out Russian oil in an orderly fashion.
To maximise pressure on Russia, while minimizing the impact on our economies pic.twitter.com/fH2wuKN5t2
— Ursula von der Leyen (@vonderleyen) May 4, 2022
SPR Releases
The April SPR sale of 30 million barrels awarded contracts to 12 companies with barrel prices ranging from $103 to $111. Glencore LTD., an international commodity trader, headquartered in Switzerland, received one of the most significant awards totaling 2.6 million barrels shipped by tankers to Europe. According to the DOE’s Successful Awards Report, 7.45 million barrels, 24.8% of the contracts, are scheduled for tanker shipments by multinational oil companies, signifying a substantial amount destined for Europe.
The United States coordinated with 30 other member countries, supported by the European Commission, to pledge the release of strategic petroleum reserves estimated at 60 million barrels. Substantially less than one day’s global usage at 96.7 million barrels.
Energy Secretary Jennifer Granholm calls the oil release a “bridge” to lower prices. AP / Evan Vucci
Depletion of US Strategic Reserves
Sress in 1975 enacted the Energy Policy and Conservation Act (EPCA, P.L. 94-163), creating the Strategic Petroleum Reserve. The Act attempts to shield the U.S. economy from oil supply shocks, including those engineered by oil-exporting countries. The Act does not grant explicit authority to the President to sell strategic reserves to foreign countries.
Biden’s drawdowns are forecasted to deplete the strategic reserves to 414 million barrels by the end of the year, a 43% decline from its high in 2010 of 727 million barrels. The projected level of the strategic reserve would be its lowest level since 1984.
The depletion of U.S. strategic stockpiles increases the market power of OPEC, Russia, and other oil exporters. There is a probability that the lower the reserves become, the more likely exporters will respond with smaller exports pushing up global oil prices. Biden refusing to expand domestic production on public lands, delaying leases, blocking the almost completed Keystone pipeline, and excoriating oil and gas producers compounds the problem.
SPR Salt Caverns at Risk
America’s oil reserves are held underground in caverns. The American Association of Petroleum Geologists’ study concluded “multiple drawdowns have caused cavern deformation, salt falls and other damage to the cavern integrity. In addition, these underground salt caverns are shrinking due to tectonic stresses. The SPR office estimates that for every 100 barrels of oil removed, there are 15 barrels of dissolved salt undermining the cavern’s structure.” Over the past two decades, there have been multiple drawdowns, i.e., Hurricane Katrina. Biden’s imprudent large monthly draws will compound the problem.
There is no public discussion or policy debate on cavern degradation that will reduce the capacity and shorten the life of the caverns. Expanding the SPR capacity is paramount o over one billion barrels capacity.
‘Drill Baby Drill’
Biden’s energy policy is like drawing down on a rainy day fund to take an extended vacation. Prepare for 1970’s disastrous style of price controls to counter runaway inflation, guaranteeing further shortages. Idiocracy is not a solution.
Bob Bishop is a retired corporate CPA
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About The Author
Joe Hoft is the twin brother of TGP’s founder, Jim Hoft. His posts have been retweeted by President Trump and have made the headlines at the Drudge Report. Joe worked as a corporate executive in Hong Kong and traveled the world for his work, which gives him a unique perspective of US and global current events. He has ten degrees or designations and is the author of three books. His new book: ‘In God We Trust: Not in Lying Liberal Lunatics’ is out now – please take a look and buy a copy.
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