From Bloomberg Today -- A Botched Strategy -- Biden's Strategic Political Reserve -- October 19, 2022

Regardless of the politics surrounding the decision to release more oil from the SPR, it's a self-inflicted botched strategy that forced the Biden administration to do this:

• killed the Keystone XL;
• slow-rolled shale permits;
• banned off-shore drilling;
• banned drilling on Federal on-shore
• started a public spat with Saudi Arabia
  

From Bloomberg today:

The US established its Strategic Petroleum Reserve, or SPR, in the wake of the 1973 oil crisis as a weapon to be wielded against overseas producers. There’s a problem with that status in 2022: the oil producers most threatened by it these days are in North America itself.

The idea of strategic commodity reserves is straightforward. By holding on to an outsized inventory, consumers are able to withdraw initial supplies to relieve tight market conditions, sanding the peaks off price spikes. Coupled with a ban on US crude exports that lasted from 1975 to 2015, that once gave Washington significant control over supplies of oil to the world’s largest consumer. If OPEC wanted to use production cuts as leverage against America, they’d have to contend with the firepower of a 714 million-barrel stockpile.

The emergence of the US as the world’s biggest marginal oil supplier has changed that. When the White House orders the release of fuel from the SPR, it’s not just blunting the OPEC+ oil weapon — it’s also deterring local producers from pumping more barrels.

You can see this change in the Energy Information Administration’s output estimates. Domestic crude producers will average 11.7 million daily barrels of production this year and 12.4 million barrels in 2023, the EIA forecast last week — down from estimates of 12 million barrels and 13 million barrels, respectively, in April, when the current releases started. As a result, a significant slice of the 1 million barrel-a-day cushion is being cannibalized by weaker domestic production.

Some of that output downgrade, to be sure, is the result of the darkening economic outlook as the Federal Reserve raises interest rates. Still, other metrics such as the differential between Canadian crude and benchmark WTI — which hit its widest level in four years last week — suggest marginal production also is being put off by the ready availability of SPR barrels.

With the White House considering a further release of 15 million barrels from reserves, that should give pause for thought. If the Biden administration is seeking an explanation for the failure of North American oil production to keep pace with demand, it’s worth considering the role of the mammoth inventory it controls in reining in animal spirits.

--David Fickling, Bloomberg Opinion