Petroleum – This report is part of ongoing coverage of the Russian-Ukrainian war. For more on this topic, visit our dedicated page.
Two weeks ago, President Joe Biden ordered the release of 1 million barrels of oil per day from the nation’s oil reserves over the next six months.
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The United States Strategic Petroleum Reserve, a collection of underground salt caverns, was created after the Arab oil embargo of the 1970s, when the United States and other Western countries faced severe oil shortages, leading to inflated oil prices. The oil crisis arose after Arab oil producers halted exports in protest against US military aid to Israel in the 1973 war with Egypt and Syria.
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The oil reserve was created to provide Americans with supplies that could be used in an emergency. The reserves, located in Texas and Louisiana, hold up to 700 million barrels of oil, but only 560 million barrels are currently available, according to the US Department of Energy.
This is the third time the Biden-Harris administration has used the reservation, but not the first time it has been affected in American history.
From left to right: Nada Sanders, Distinguished Professor of Supply Chain Management, and Nick Beauchamp, Assistant Professor of Political Science at Northeastern. Photos by Adam Glanzman and Alyssa Stone / Northeastern University
In 1991, President George H.W. Bush ordered the removal of nearly 34 million barrels during the Gulf War, but 17 million barrels were used at the time. Also in 2011, President Barack Obama authorized the release of 30 million barrels to offset supply disruptions from Libya.
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During Biden’s State of the Union address in March 2021, he ordered the release of 50 million barrels of oil. In November 2021, he approved an additional 30 million barrels to increase oil supplies.
Now Biden is once again tapping the reserve to fight the country’s current oil crisis and control energy prices, which have been rising slowly but were recently boosted by world leaders imposing sanctions on Russia over the war in Ukraine.
It’s the largest release of oil from the Strategic Petroleum Reserve in U.S. history and will drop oil levels to 384.6 million barrels by the end of the six months, a 40 percent drop in reserves since Biden took office, according to ABC. January 2021.
But the question remains, should the president or any future president join the reservation and is it really in the interest of the American people?
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“We must not give an inch to the fossil fuel industry. And at this point, I wouldn’t even touch the reserves,” says Nada Sanders, distinguished professor of supply chain management at Northeastern. “Once you enter it, you have to fill it out. Replenishment means a green light for more drilling — a green light for the oil companies, and that worries me.”
The US Department of Energy reported that the country consumed nearly 20 million barrels of oil per day in 2021. The president said it was unknown whether gas prices would drop significantly, but suggested they could be “anywhere from 10 cents to 35 cents a gallon” in the coming months.
“When you compare simple consumption, what is the consumption every day to the amount that is released, what would it do? It would do nothing,” says Sanders. “It won’t do anything [for oil prices], but it will be very damaging.”
NPR reports that Bob McNally, who is a consultant at Rapidan and worked on the neck under the George W. Bush White House, says, “I doubt that this big announcement is going to hold up oil prices, and that’s why gasoline prices are going to hold up, and that’s why , because Russia is the world’s largest oil exporter.”
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The Associated Press reports that even if crude oil prices don’t drop, Biden can claim that he at least tried to tap into the reserves.
“Nobody thinks the impact on gas prices is going to be particularly big, so if these things are true, it almost certainly has to be purely political,” says Nick Beauchamp, assistant professor of political science at Northeastern.
Following Mr. Biden’s latest order, the White House announced that it expects domestic oil production to rise by 1 million barrels a day this year and by nearly 700,000 barrels a day next year.
“They use up those barrels and then buy them again when the prices drop a bit. When this war [in Ukraine] is over, they’re probably going to be pretty much on the ground,” Beachamp said. “On the other hand, nobody knows if the war is going to last two weeks, two years, or 20 years.”
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In May 2013, domestic oil production in the United States exceeded imports for the first time since January 1997. It is not a coincidence that domestic production exceeded imports, but due to trends that are already there. in Crude oil imports have declined over the past 7 years, while domestic production has recovered strongly. According to the International Energy Agency, by 2020 the United States will overtake Saudi Arabia to become the world’s largest oil producer, and a year later it will be 10th energy independent.
In 2005, the amount of foreign crude oil and petroleum products imported into the United States peaked at just over 5 billion barrels. Beginning in 2006, the volume of US imports began to decline and continued to decline in 6 of the following 7 years. By 2012, imports had fallen 22.5 percent to just over 3.8 billion barrels.
As shown in Table 1, 2009 was an exceptional year for domestic oil production. For the first time in 17 years, U.S. production rose 6.8 percent from a year earlier to 1.95 billion barrels. Production continued to increase over the next 3 years, increasing by 21.7 percent to 2.38 billion barrels by 2012.
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The increase was particularly evident in 2012, when US crude oil production rose 15.3 percent, well above the global average of 2.2 percent, and averaged 8.9 million barrels of crude oil per day.
While production in Alaska declined, production in the continental US rose from just over 4.7 million barrels per day in 2009 to just under 6 million barrels per day in 2012.
From 2009 to 2012, much of the increase in domestic production came from increases in oil production in Texas (87.2 percent), North Dakota (437.4 percent), Oklahoma (39.6 percent), and New Mexico (40.7 percent ).
The large increases experienced by each of these countries, some beginning as early as 2003, were in stark contrast to the historical trend of declining production that has existed nationally since the 1980s. American production increased due to new production technologies, such as horizontal drilling and hydraulic fracturing, used to extract oil and gas from shale formations that were once considered unprofitable.
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With the general increase in domestic production, the level of drilling activity also increased. The number of rotary rigs (machines used to drill oil wells) increased significantly from 2002 to 2011. In 2002, there were 137 rotary rigs operating in the United States. By 2011, the number had increased by 618.2 percent, to 984.
The number of oil wells in the country has also increased: from 1997 to 2002, the number of active oil wells decreased by 9.1 percent, and from 2002 to 2009, the number rose from 354,640 to 363,459, a 2.5 percent increase . cent
A dramatic increase in domestic oil production in the United States has coincided with a decline in domestic oil consumption. Domestic oil consumption fell from 18.9 million barrels per day in 2011 to 18.6 million barrels per day in 2012, a decrease of 1.6 percent.
The decrease in demand was reflected in the main economic sectors. The transportation sector is the most important sector of the American economy in terms of oil consumption. At its peak in 2007, 14.3 million barrels of oil per day were used, of which 9.1 million barrels per day were used to produce gasoline. By 2012, gasoline consumption had decreased by 6.6 percent, to 8.5 million barrels per day. Total consumption in the transportation sector, which accounted for 70.5 percent of U.S. oil consumption, fell 9.1 percent to 13 million barrels per day.
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