A new round of crude loans from the nation’s Strategic Petroleum Reserve (SPR), as is reportedly being considered by the Trump administration, would create "a perfect storm" instead of providing significant relief to U.S. drivers, according to an analyst.
The U.S. Department of Energy (DOE) is currently gauging interest among trading firms and refiners in another round of crude loans as part of its plan to release 172 million barrels from the facility, Argus Media reported on Tuesday, citing anonymous market sources.
The drawdown was first authorized by President Donald Trump in March as a way "to protect America’s energy security" amid the global volatility triggered by the war in Iran, U.S. Secretary of Energy Chris Wright said at the time of the initiative’s launch.
The move was aimed at boosting near-term market supply and counteract disruptions caused by the effective closure of the Strait of Hormuz, where one-fifth of the world’s oil normally transits.
Between March and June, the DOE lent more than 133 million barrels to companies that are required to return the same volume later on, but another offer for a loan of 40 million barrels did not draw much interest. According to Argus Media, only 500,000 barrels were contracted in that fourth round, as falling crude prices made the exchange less appealing for trading firms and refiners.
Oil prices reaching record high prices earlier this month likely encouraged the administration to look into the possibility of yet another round of loans. As much as 30 million barrels could be released as part of this potential new round, sources said.
"Crude from the Bryan Mound and Big Hill SPR facilities could soon be offered for loading in November and December, with earlier loading dates awarded to those making higher bids. It is not clear what the higher bids would entail, and DOE could choose not to make any awards," commodity analyst Giovanni Staunovo wrote on X.
Newsweek contacted the DOE for comment by email on Wednesday and is awaiting a response.
‘Does Virtually Nothing’
Patrick De Haan, head of petroleum analysis at GasBuddy, reacted negatively to news of a potential new round of loans from the SPR, writing on X: "Why are we literally trying to create a perfect storm?!?" In another post, he said of the idea: "This will backfire and is not good."
De Haan explained that falling gas and diesel prices in the U.S. right now are "all about refining, and releasing more oil does virtually nothing" but increasing the country’s exposure "if the situation keeps dragging on."
One crucial factor is that oil prices have now started falling again, with the price of Brent crude, the global benchmark for oil, falling by over 2 percent to about $98 a barrel this week, down from nearly $109 a week ago. The sudden decline has come as investors anticipate that a Saudi Arabian pipeline shut down after attacks by Yemen’s Houthis may be close to reopening.
According to De Haan, "oil is not ‘expensive’" now, "it’s still around or even slightly below the long-term averages," he told Newsweek. "Incremental oil supplies, such as another 75 million barrels, will not move the needle significantly as the current reason for higher gasoline and diesel prices is a global refining crisis—not enough capacity."
"Oil still needs to be refined, so releasing more doesn’t meaningfully improve the current situation, but it could potentially leave the U.S. even more vulnerable if there does become a super spike in oil prices," De Haan said.
Releasing more oil from the nation’s SPR will not lower prices at the pump, De Haan wrote on X, but "it puts us at more risk if oil prices could become ensnared in something new."
This "perfect storm" could be brought about by another initiative being considered by some lawmakers right now: a ban on U.S. diesel exports, with Senate Majority Leader John Thune saying he is "open to exploring one." For De Haan, this is a misguided and potentially damaging idea.
Refineries in the U.S. produce roughly 5.3 million barrels of distillates per day against demand of around 3.6 million barrels per day domestically, De Haan wrote in a recent analysis, and does not face a domestic shortfall of diesel. It is the global shortfall of diesel that is pushing prices up in the U.S., and "keeping distillates and diesel home does not change the world price that reference our prices," he wrote.
"Banning diesel exports, another SPR sale both put the U.S. at increased risk in the future—we’re seemingly creating an environment that’s MORE risky, not less, for the long term if both of these happen," he told Newsweek.
But De Haan doubts that a new round of loans from the SPR would draw much interest this time. "I don’t think there’s much of one, because oil companies know where to get oil right now, again at $90/bbl. it’s not too hard to find," he said.
How Much More Are Americans Paying for Gas and Diesel?
As of Wednesday, the national average gas price was $4.47 per gallon, up from $2.98 per gallon before the U.S. and Israel launched joint strikes on Iran on February 28, starting the ongoing war in the region, according to the American Automobile Association (AAA).
Drivers in California paid the highest price in the nation at the pump, for an average of $6.20 per gallon, up $4.65 per gallon from a year ago. In five other states, the average was above $5 per gallon, including Hawaii ($5.56), Washington ($5.55), Nevada ($5.36), Oregon ($5.10) and Alaska ($5.06).
Drivers in Texas paid the lowest gas prices in the nation, for an average of $3.96 per gallon, followed by Indiana ($3.98), Mississippi ($3.99), South Carolina ($4.03) and Louisiana ($4.03).
The average diesel price was $6.52 per gallon, up from $3.69 a year earlier. The highest price in the country could be found in California, at $8.44 per gallon; the lowest was in Texas, at $5.95 per gallon.
Contact Newsweek editors on this story: Matthew Robinson and James Debens