The cost of gasoline is on the rise as crude oil prices have climbed steadily to 10-month highs, but it may be difficult for the U.S. government to ease the burden on households.
- Rising crude oil prices have led to higher costs for U.S. consumers at the pump, where prices are higher for this time of year than they’ve been in a decade.
- Inventories at the Strategic Petroleum Reserve (SPR) are at their lowest since 1983 after record drawdowns last year.
- This could hamper the government’s ability to alleviate prices in the short run.
Gas prices are climbing once again, topping a 10-year record for early September and increasing the financial burden on U.S. households. At $3.81, gas prices are higher than at this time last year, and the second-highest on record for this time of year in AAA records going back to 1994.
That’s the result of a steady increase in oil prices in recent weeks, which have risen to the highest levels in almost 10 months due to production cuts by OPEC+ and dwindling inventories in the U.S. Prices could climb higher still after Saudi Arabia announced Tuesday it’s extending its latest production cut—equal to 1 million barrels per day of supply—until December.
In the past, the U.S. government has attempted to counterbalance rising prices somewhat by releasing oil from its Strategic Petroleum Reserve (SPR) into the market. This could be more difficult now, as SPR stockpiles have dwindled to the lowest level in 40 years following last year’s record drawdowns.
The SPR acts as a rainy day fund for the U.S. government to use in the event of a major disruption to the oil market, such as an economic crisis, natural disaster, or war. Releasing oil from the reserve can have a short-term impact on the direction of prices, but its impact is negligible in the long run as the reserves constitute just a small fraction of the global oil supply circulating daily.
Last year, the Biden administration released a record quantity of reserves from the SPR in an attempt to counteract a surge in oil prices in the first half of the year, shortly after Russia invaded Ukraine. SPR inventories shrank from 594 million barrels at the end of 2021 to just 372 million barrels by the end of last year.
As of June—the latest month for which data is available—SPR inventories stood at 347 million barrels, which is down more than half from an all-time high of almost 727 million barrels in 2010.
Supplies are unlikely to recover to pre-2022 levels anytime soon. In March, U.S. Energy Secretary Jennifer Granholm warned it could take years to replenish the lost reserves, while the DOE last month delayed a planned purchase of 6 million barrels of crude oil, saying it would wait for prices to come down to secure a better deal for taxpayers.