House GOP tees up a vote on the Strategic Petroleum Reserve as it hovers at historic lows
House Republicans are planning a vote this week to rein in the Biden administration when it comes to the nation's Strategic Petroleum Reserve (SPR).
The bill would link releases from the crucial energy backstop to U.S. domestic oil production. Other than during an emergency situation, a president wouldn’t be able to tap the reserve unless it simultaneously released a plan to increase oil production in the U.S.
The effort isn’t expected to be enacted or gain much bipartisan support, but it could nevertheless kickstart a simmering debate about the proper management of the SPR that has economic and national security implications with the reserve currently hovering at its lowest level since 1983.
“The administration has been mugged by reality over the last year and a half,” said Robert McNally, founder of the Rapidan Energy Group and former energy advisor to former President George W. Bush.
While there’s bipartisan blame to go around for the state of the SPR, including previous administrations as well as Congress, McNally said, “the Biden administration, to its credit, has begun to turn the boat around and start to focus people on the need to refill the SPR.”
The Biden administration made a first big withdrawal from the SPR starting in Nov. 2021 of 50 million barrels in response to high gas prices. It followed up with over 180 million barrels over the course of 2022 in the wake of the invasion of Ukraine. Those were in addition to other scheduled regular withdrawals, and cycling of the SPR.
Last month, the administration announced plans to begin replenishing the reserve, but rejected some initial offers because of pricing, with crude oil currently above $80/barrel.
"It certainly is a tricky situation when you are trying to replenish what you took out at prices that are not necessarily beneficial," Charles Schwab Chief Investment Strategist Liz Ann Sonders noted on Tuesday.
Still, Energy Secretary Jennifer Granholm told reporters on Monday she is not worried about reaching the administration’s goal of buying 60 million barrels in the coming months, teasing an announcement that she promised “very soon.”
A push to make the SPR solely for ‘true energy supply disruptions’
Meanwhile, the newly empowered House Republicans plan to introduce their three-page bill as early as Wednesday, promising to offer it under a modified-open rule — Washington-speak for allowing lawmakers to freely propose amendments.
This week’s vote follows a Jan. 12 vote around the SPR and China, which received wide bipartisan backing, a feat that is not expected to be repeated this week.
Partisan positions of both sides are clear with House Energy and Commerce chair Cathy McMorris Rodgers (R-WA) recently accusing Biden of "draining our strategic reserves for political purposes" instead of in response to a true emergency. The White House has staunchly defended its approach, including releases intended to provide relief at the pump.
The actual picture appears to be more nuanced.
“I'm a Republican, I have a high threshold for using SPR, and I could be critical as anybody,” said McNally, adding that when it came to Russia’s invasion of Ukraine, “I tell my Republican friends, look, there was a legitimate reason to order a release then because of that perceived risk.”
But McNally draws the line at the earlier 2021 release of 50 million barrels — before the invasion of Ukraine — in order to address gas prices.
“That first release goes in the hall of infamy of politicized SPR releases,” McNally said.
Could the SPR become 'useless?'
Biden himself is set to respond forcefully to this week’s energy debate with a speech planned Thursday in Virginia to again focus on the the House GOP agenda, which he has called “fiscally demented.”
Already, the White House has promised a veto of this week’s bill in the unlikely event it ever reaches Biden's desk, saying it would raise gas prices and tie the hands of future presidents.
Meanwhile, House Democrats re-introduced their own bill last week called the Buy Low and Sell High Act that would allow the SPR to be used more directly to combat high prices at the pump.
But the Capitol Hill debate — and high likelihood of gridlock — comes amid concerns that the Biden administration could be pressured to further deplete the reserve if, as some expect, oil prices rise again in 2023.
Prices are likely to head higher — at least in the spring — which could bring the national average back above $4 a gallon, according to Patrick De Haan, GasBuddy’s head of petroleum analysis. Whether prices keep going up is “really going to be contingent on if refineries are able to meet demand [from places like China] and what Americans do this summer,” De Haan recently told Yahoo Finance.
The fear is the reserve could fall even further and reach levels below what's been recorded in government data, which stretches back to 1982.
At that point, McNally said, ”we're down to getting close to where it's useless.”
Ben Werschkul is Washington correspondent for Yahoo Finance.
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