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Roula Khalaf, Editor of the FT, compiles her preferred articles in this periodic bulletin.
The Trump administration, which undoubtedly meticulously strategized its conflict with Iran and evaluated every possible outcome, appears to grow more concerned about the utterly unpredictable surge in fuel costs.
Indeed, fuel station rates are currently nearing the $4 per gallon threshold, a level numerous US citizens perceive as a blatant insult to all that is sacred and virtuous. We’ve observed multiple drastic actions to curb the increase, such as pausing the Jones Act, relaxing restrictions on Russian entities, and potentially even receiving crude from Iran.
This final point could be the most striking, considering the illogic of attacking a nation while facilitating the export of its primary economic support. However, this may be the most desperate:
Bessent . . . referenced a 400 million-barrel collaborative Strategic Petroleum Reserve deployment authorized the prior week, adding that the U.S. might intervene independently once more should it be required.
“The most substantial synchronized SPR deployment ever, totaling 400 million barrels, was approved last week,” he stated. “The U.S. could unilaterally execute another SPR release to contain the cost.”
The US Strategic Oil Reserve comprises numerous immense, underground salt formations across four distinct locations in Louisiana and Texas, having been established following the 1973-74 Arab petroleum boycott. A significant number are colossal — the average cavern accommodates approximately 10 million barrels, equivalent to the capacity of five Very Large Crude Carrier vessels — and one is sufficiently capacious to enclose Chicago’s Willis Tower.
This ingenious system of subterranean passages, chambers, extraction devices, and shafts possesses an aggregate capacity of approximately 715 million barrels of crude, which is sufficient to meet the entire US’s petroleum requirements for more than a month (based on 2023 usage figures).
Regrettably, the inventory stood at merely 155 million barrels of light crude and 261 million barrels of heavy crude as of the 13th of March, per the SRP’s official portal. This is attributable to the fact that President Joe Biden mandated the depletion of 180 million barrels in 2022 after Russia’s incursion into Ukraine destabilized energy markets, with the US subsequently lagging in its efforts to refill it.
The Trump administration has previously announced its intent to deploy 172 million barrels within a broader, unprecedented 400 million-barrel global distribution. However, upon completion, this action will reduce the SPR’s reserves to 244 million barrels — and legal statutes actually prohibit the government from further depleting inventories should the quantity in the salt caverns fall below 252 million barrels.
The US might, naturally, proclaim a state of emergency — even though such a declaration typically signifies a genuine predicament of severe energy deficits, rather than merely elevated fuel costs prior to mid-term polls — or persuade Congress to amend the legislation. Nevertheless, a further stringent boundary exists that is considerably more resistant to coercion: the laws of physics.
The SPR’s salt cavern system was not conceived to function as a perpetual oil reservoir that can be effortlessly depleted and refilled at will. As Bloomberg previously disclosed:
The Gulf Coast salt caverns that constitute the 1970s-era repository were constructed with an intended operational period of 25 years. They were engineered for merely five depletion and replenishment cycles, stated William “Hoot” Gibson, the reserve’s erstwhile program director. Increased utilization of the system elevates the hazard of the salt caverns undergoing dissolution.
According to Alphaville’s reckoning, this marks the ninth depletion (whether urgent or routine) since the SPR’s establishment in 1977. Consequently, there is seemingly a baseline volume of petroleum required to be maintained in the salt caverns to avert disastrous structural deterioration.
We have been unable to ascertain precisely what this level entails (despite examining several recent SPR briefs submitted to Congress), but JPMorgan’s energy sector specialists indicated last week that it approximated 150 million barrels, exceeding which hazardous outcomes could materialize.
. . . The SPR has a pragmatic operational threshold near 150–160 mb that is essential to retain to safeguard cavern integrity and sustain adaptive functionality, encompassing a modest volume of “roof oil” that is inaccessible for extraction.
Thus, certainly, it is conceivable that the US government may disburse additional petroleum from the SPR, surpassing the 172 million barrels it has previously declared. Yet, not to the extent it has committed, and approaching the fundamental operational floor would likely incite apprehension above all else. Such is the nature of extreme urgency.