In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an embargo against the United States in retaliation for its decision to resupply Israel during the fourth of the Arab-Israeli wars. The Yom Kippur War, as it became known, started on October 6, 1973. The embargo banned petroleum exports and introduced cuts in oil production. At the same time, the Organization of Petroleum Exporting Countries (OPEC) sharply raised the price of crude oil, and the embargo acutely strained the U.S. economy as the price of oil went from $2.90 a barrel to $11.65 a barrel over the course of a few months. The embargo also coincided with the devaluation of the dollar, and a global recession seemed imminent. It was not until March 1974 that the embargo was officially lifted, although the high oil prices remained.
The crisis laid bare the challenges of the U.S. policy of unflinching support for Israel and the preservation of close ties to Arab oil-producing monarchies. President Richard Nixon introduced a new energy strategy, tied to the advancement of nuclear energy technology, that was intended to boost domestic production to reduce U.S. dependence on foreign oil imports and ease the strain of nationwide fuel shortages. However, his strategy was only partially successful. In 1975, Congress authorized the Energy Policy and Conservation Act (EPCA), which President Gerald Ford signed into law. The EPCA authorized the creation of a strategic petroleum reserve (SPR) to prevent or mitigate the consequences of oil supply shocks and economic disruption caused by the embargo.
Under the EPCA, the president can independently authorize an emergency drawdown from the SPR. The president can also order a limited withdrawal of up to 30 million barrels without declaring an emergency drawdown (unless there are fewer than 252.4 million barrels in reserve). Additionally, the U.S. meets its obligations to the International Energy Agency (IEA), an intergovernmental organization that coordinates emergency responses to energy crises among member nations, through the SPR. As an IEA member, the U.S. must maintain stock equivalents of 90 days of net imports. Thus far, Congress has authorized several non-emergency sales through the years, often in order to pay for government programs.
Per the EPCA’s requirements, refilling the SPR is at the president’s discretion, although Congress retains approval power over restocking.
The SPR’s current capacity is 727 million barrels. In 2005, Congress authorized expansion to 1 billion barrels, which would have expanded drawdown and distribution capabilities. However, in FY2011, President Obama canceled SPR expansion plans based on a U.S.
Energy Information Administration (EIA) projection that petroleum consumption would decline in the future and, therefore, the reserve would meet the 90-day threshold by 2025. Thus, the SPR capacity still stands at 727 million barrels. However, that projection has not come to fruition. Consumption in the United States has remained relatively constant over the last several decades except during the COVID-19 pandemic.
The SPR began to be filled under President Carter, reaching 108 million barrels during his term. President Reagan prioritized filling the SPR at a level no other president would match, adding 452 million barrels. By the time he left office, the SPR had reached 560 million barrels. Following the September 11, 2001 attacks, President George W. Bush announced he would fill the SPR to its capacity, adding 161 million barrels over his two terms.
When President Barack Obama entered office, he inherited a full SPR. Up to that point, presidents had sold the SPR just twice for emergency disruptions: in January 1991, when the government sold over 20 million barrels after exports from Iraq were disrupted by Operation Desert Storm, and in 2005, when George W. Bush authorized the sale of 11 million barrels after Hurricane Katrina disrupted production in the Gulf of Mexico.
However, in 2011, President Obama ordered the sale of 30 million barrels to offset a reduction in Libya’s production during the First Libyan Civil War. At the time, domestic gas prices had soared to over $4 per gallon, and this move from the Obama administration was heavily criticized as a ruse to lower the price of gas in the lead-up to the 2012 election.
When President Trump entered office, the SPR was at 695 million barrels, which would decline to 635 million barrels by 2019. All in all, President Trump drew down about 10% of the SPR during his term. In March 2020, President Trump directed the Department of Energy to fill the SPR to maximum capacity to help support domestic oil producers during the COVID-19 pandemic. However, funding was blocked by congressional Democrats who called the plan a misuse of government funds that would accelerate climate change. Had the plan gone forward, Americans would have benefited from the act since prices were about $15-20 a barrel, the lowest in decades.
By the time President Biden took office, the SPR was at 638 million barrels. In 2021, the administration withdrew 50 million barrels in an effort to stabilize gas prices. Following the Russian invasion of Ukraine, the administration sold off an additional 180 million barrels, more than 40% of the SPR, in 2022 – the largest-ever SPR sale. At the time, the administration sold the 180 million barrels at an average of $95 a barrel and announced it would buy back oil at $79 a barrel or less – or when market conditions allow. However, with the U.S. benchmark West Texas Intermediate surpassing $85 per barrel recently, the
administration canceled two planned oil purchases. While the administration has executed several planned purchases in small amounts, the SPR remains at a historically low level, sitting at only 365 million barrels.
Buybacks of larger volumes could risk pushing up oil and gas prices, which the Biden administration will be careful to do in an election year. However, the administration’s SPR depletion strategy comes with high risk. As the administration cut domestic oil production due to Biden’s aggressive climate agenda and drained the SPR in order to counter high gas prices, the country is even more vulnerable to severe supply disruption as turmoil in the Middle East worsens. With high inflation and the summer travel season set to begin, many predict the administration will look to tapping into the SPR again to counter a spike in gas prices before the November election, further depleting our country’s emergency reserves.
President Biden’s disastrous policies have put the United States in a tight spot. With predictions of an extremely active hurricane season on the horizon and as the world continues to plunge into turmoil due to a lack of American strength, Biden’s energy strategy is gambling with America’s national security. By stifling domestic energy production, the Biden administration is leaving Americans vulnerable to supply chain shocks and soaring gas prices while depleting our emergency resources as a political strategy ahead of the November election.
The 1973 oil embargo still holds important lessons for us today. Energy security is the linchpin of national security and Americans should not have to depend on foreign nations to supply our energy needs. Americans should demand more of their leaders, and support policies that strengthen our domestic industries, keep the price of gasoline affordable for working families, and save our rainy-day petroleum reserves for when we truly need them.
