Understanding one of Trump's top priorities after taking office - filling the strategic petroleum reserve.

The returning US President Donald Trump plans to refill the United States' emergency crude oil reserve system, saying he wants to "fill it to the top, all the way to the top." According to Trump's advisors, this will help prevent future oil price shocks and aims to significantly reduce the cost of living for American citizens, as energy-related expenses make up a significant portion of the US CPI. However, some analysts believe that while it's easy to say, it will be difficult to do. Statistics show that between 2020 and 2023, about half of the US Strategic Petroleum Reserve (SPR) was depleted. This was mainly due to former President Joe Biden selling oil after a fierce conflict between Russia and Ukraine to lower gasoline prices, prevent the US from falling into stagnation or recession, and Congress ordering the sale of oil reserves to fund the government. Trump needs approval from Congress to purchase $24 billion worth of crude oil reserves to fully fill the four heavily guarded deep salt caverns along the Gulf of Mexico coastline. According to industry analysts, such a large-scale purchase of crude oil will take a long time and could potentially push oil prices up, thereby undermining Trump's campaign promise to halve energy costs. Additionally, the historic drop in international oil prices stimulated by expectations of "oversupply" since the second half of 2024 has broken the monopoly of US shale oil, challenging Trump's energy domination vision. How much crude oil reserves are left? Official statistics show that as of January 17, the reserve held approximately 394.6 million barrels. After former President Biden ordered the largest release in history, this level accounted for 55% of its maximum capacity of 714 million barrels, reducing the reserve to its lowest level since the 1980s. Even before this, the reserve level had been declining for about a decade due to Congress ordering the sale of reserves to help pay for a series of costly legislative measures. How much money is needed? How long will it take? The current price of WTI crude oil futures, the North American benchmark, is about $75 per barrel. The Trump administration would have to purchase 320 million barrels of crude oil to replenish the reserve system. This means that filling the Strategic Petroleum Reserve (SPR) entirely would cost approximately $24.3 billion. Trump may also choose not to fill the reserves to full capacity but to maintain them in a state where they can meet demand at any time and still have a surplus. On Wednesday, WTI crude oil futures fell to $75.5 per barrel for the fourth consecutive trading day, after President Trump reiterated consideration of imposing a 10% tariff on major oil-consuming country China. This has heightened concerns about the start of a new trade war. The day before, Trump also suggested imposing high tariffs on Canada and Mexico. The market continues to assess the impact of Trump's declaration of a national energy emergency to relax permits, fully open up cultivation areas, and reverse the clean energy policies of the Biden era to increase oil production. Such a large-scale commodity transaction requires careful consideration. The US will need to purchase in batches to avoid pushing up oil prices. Nevertheless, the American Petroleum Institute (API) estimated last year that fully replenishing the US Strategic Petroleum Reserve (SPR) would take at least 19 months. Why does Trump want to replenish the Strategic Petroleum Reserve? The Strategic Petroleum Reserve (SPR) serves as a national energy security net and was established after the oil embargo by Arab countries in the 1970s. Once the SPR is fully deployed, it sends a strong signal to the Organization of the Petroleum Exporting Countries (OPEC) and its allies that the US does not have to succumb to attempts by OPEC and its allies to raise oil prices. At least not immediately. Politically, this allows the Trump administration to contrast itself with previous administrations and emphasize its support for the oil industry chain. Why didn't the Biden administration choose to replenish the oil reserves on a large scale? It must be acknowledged that the Biden administration did try, but ran out of funds after buying about 60 million barrels. However, the US government under his leadership was praised for canceling the additional sale of about 140 million barrels authorized by Congress, which avoided unnecessary sales unrelated to interruptions in oil supply. Under what circumstances can the President release oil from the reserves? This is almost a privilege of the US President. The law establishing the reserve, enacted in 1975, clearly states that if a "severe energy supply disruption" occurs that threatens the national security or economy of the US, the President has the authority to order the full use of the strategic reserves. If there is a "domestic or international energy supply shortage that is significant in scope or duration," the President can order limited use of the strategic reserves (up to 30 million barrels maximum). How have past US Presidents utilized the Strategic Petroleum Reserve? Apart from temporary responses to localized disruptions in oil supply, the US has only used the strategic oil reserve a few times. In 2017, when Hurricane Harvey hit the Gulf Coast region, the US Department of Energy authorized an emergency release of 5 million barrels from the strategic oil reserve to refineries in the area. After Hurricane Katrina in 2005, President George W. Bush released 11 million barrels from the strategic oil reserve. In 2011, President Barack Obama and other countries jointly released 30 million barrels from the strategic oil reserve to address supply disruptions caused by the situation in Libya. During the first Gulf War in 1991, under President George H.W. Bush, 17 million barrels of oil reserves were released. What guidelines are involved in releasing strategic reserves? According to data from the US Department of Energy's website, the US President's maximum use capacity is 4.4 million barrels per day, and after the President's decision, the resources of the strategic oil reserves need 13 days to enter the open market for trading according to regulatory guidelines. After an emergency release of oil reserves, refineries and other buyers often agree to repay in kind in the future. Test releases of reserves are also occasionally carried out, and limited releases are made in exchange form. Which other countries have strategic reserves? China, India, Japan, and South Korea are the core countries with strategic oil reserves in Asia. The European Union is also an important reserve country. According to data from the European Union Statistics Bureau, as of May 2024, EU member states collectively held 1.104 billion tons (about 8.2 millions.3 billion barrels) of emergency strategic crude oil reserves.Does SPR still have significant importance in today's market? Compared to the first forty years of its establishment, its importance is undoubtedly not as great as before. At that time, the United States was almost entirely dependent on foreign oil supplies. In 2006, the peak net import of total crude oil, including both crude oil and refined petroleum products, reached around 13.4 million barrels per day. However, since then, the hydraulic fracturing technology and shale oil revolution have made the United States the largest producer of crude oil and petroleum products in the world. Today, the United States has become a net exporter of crude oil, with its overall crude oil production even surpassing that of Saudi Arabia by about 50%. Nevertheless, the United States remains one of the largest consumers of crude oil in the world, and is still vulnerable to fluctuations in crude oil benchmark prices, especially during natural disasters or geopolitical crises. Regular use of strategic petroleum reserves after hurricanes and floods may be the strongest rebuttal to the long-standing market view of abolishing strategic petroleum reserves.