As the U.S. stockpile of crude oil dissipates amid Trump’s war against Iran, an economist warned that “once it’s gone, it’s gone,” and the Strategic Petroleum Reserve can only do so much to protect drivers from higher gas prices.
The administration has been tapping the reserve since March to offset shortages, but Michael Snipes, Associate Professor of Instruction of Economics at the University of South Florida, compared it to a finite rainy-day fund.
“The current administration… is tapping the strategic oil reserve for the United States to help boost supply shortages due to the conflict in the Straight of Hormuz. Think of the strategic oil reserve as a savings account for oil for the U.S. It’s nice to have, but once it’s gone, it’s gone. The sooner the situation in the Middle East is resolved, the better it will be for oil and gas prices,” Snipes told The Mirror US in an email. It comes after Karoline Leavitt accidentally humiliated Trump as critics asked about his ‘diaper’.
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The warning comes as new data found that the U.S. has a much lower stock of reserves than normal. According to Bank of America Global Research data compiled by Bloomberg and cited by The Associated Press, the U.S. now has about 43 days of crude oil supply, including the Strategic Petroleum Reserve, versus the historic long-term average, which is closer to 65 days.
The AP reported the measure is at its lowest level since the 1980s, leaving less room for error if fighting escalates or if the flow of oil through the Strait of Hormuz is disrupted.
The AP reported the measure is at its lowest level since the 1980s -Credit:AP
A day prior to the report, President Donald Trump sought to pin blame on oil companies rather than the ongoing Middle East conflict that has choked up the Strait of Hormuz. Oil prices have swung sharply during the conflict, with Brent crude at times jumping above $90 a barrel amid concerns over tightening supply and higher shipping risks.
Trump criticized Exxon and Chevron after the companies posted blockbuster profits during a period of high oil prices. “They’re making too much money. [It’s] too much money. You’re surprised? I’m saying it. I’ll say it loud and clear,” Trump said to reporters before calling on the companies to slash retail fuel prices.
Oil tankers and cargo ships lining up in the Strait of Hormuz in March -Credit:AP
Arif Gasilov, Partner, Natural Resources & Built Environment at Gasilov Group, countered that, “He can pressure them all he wants, but under one percent of the convenience stores that sell gas in this country are owned by a major oil company and 95 percent of them are independently owned. He is demanding a price cut from people who do not work for Exxon or Chevron.”
Experts say the main forces pushing gasoline up are global, not local. Snipes noted that crude oil “is sold on the global market” and that “the price of crude is set at a global scale,” meaning conflict overseas can quickly add a “risk premium” to prices paid everywhere.
Economists argue that today’s rise is being driven overwhelmingly by geopolitics -Credit:AP
He also argued that today’s rise is being driven overwhelmingly by geopolitics: “I don’t feel that any kind of rent-seeking done by oil companies is what is primarily driving gas price increases these days: that is almost exclusively due to the conflict in the Middle East.”
Alexander Briggs, Chief Trading Strategist at Supertrader, warned against assuming oil-company profits automatically translate into the number on the gas station sign. “People often assume oil company profits and gasoline prices move in lockstep. They do not,” Briggs said.
Others point to domestic constraints that can worsen price spikes. Gasilov says refiners and fuel supply chains can create a choke point that keeps pump prices higher for longer. “There is a bottleneck between the barrel and the gas tank, and whoever owns that bottleneck collects,” Gasilov said.
