By Timothy Gardner

WASHINGTON, (Reuters) – The Biden Administration is looking at tapping the U.S. Strategic Petroleum Reserve in order to cool down oil prices that are driving up fuel costs and inflation.

Analysts believe that such an action may have no long-term effect on the decline in U.S. oil price, which hit a high of $85/barrel for seven years late October.

The Biden administration could release oil to help counter criticisms that it has failed to do enough to curb rising prices ahead of the midterm elections in 2022. Biden could use it to claim that he took actions after Saudi Arabian and Russian members of the OPEC+ producer group resisted U.S. requests to increase oil imports to global markets.

These are some of the problems surrounding the use of the SPR.

WHY DID THE SPR COME OUT OF THINGS?

In 1975, after oil prices spiked in the Arab world and caused economic damage to the United States economy, the United States set up the SPR. The stockpile has been used by presidents to stabilize oil markets in times of war and hurricanes that hit the U.S. Gulf of Mexico.

HOW MUCH OIL HOLDS THE PR?

The current reserve holds 606 million barrels of oil in caverns at four locations along the Texas and Louisiana coasts. This is enough oil for the United States to supply more than one month’s worth of demand.

Fluor Corp The SPR is managed and operated by Texas-based engineering and construction firm (NYSE:).

In the U.S. Northeast, there are small gasoline and oil reserves.

HOW DOES SPR OIL GET TO MARKET

The SPR is able to ship up to 4.4 million barrels per hour due its proximity of major U.S. refineries or petrochemical centres. According to the Energy Department, it can take just 13 days for oil to reach the U.S. markets after a president has made a decision.

The Energy Department holds an auction online where oil companies can bid for the oil. Oil companies can swap crude oil for interest.

Three times have the U.S. presidents authorized an emergency sale from SPR, including in 2011, during a conflict in Libya. Also, sales were made during the Gulf War of 1991 and Hurricane Katrina 2005.

More oil swaps are occurring, the most recent being in September following Hurricane Ida.

WHAT CAN THIS TIME MAKE DIFFERENT?

In recent years, Congress passed two bills requiring sales of reserve funds to pay government programs.

Biden could sell oil directly from its reserve instead of resorting to an emergency sale. Instead, it could front-load sales as Congress mandates. SPR must now sell 30,000,000 barrels of oil between September 2025 and September 2025. However, Congress didn’t specify when exactly the oil should be sold.

Biden’s administration could be able to conduct sales this way, which would help it avoid being criticized by environmentalists for selling oil while urging global economies reduce greenhouse gas emissions. The administration could be criticised for front-loading transactions, which may lead to accusations that it was political.

WHAT ARE OTHER COUNTRIES WITH STRATEGIC RESTRICTS?

The United States is not the only one that must have oil reserves. All 29 members of the International Energy Agency (including Australia, Germany, Japan, and Germany) are also required to maintain oil reserves equal to 90 days’ net oil imports.

China is an associate member to the IEA. It’s the second-leading global oil consumer. In September, it held its first oil reserve auction. India is another IEA member and maintains a reserve.

U.S. presidents are also able to coordinate a release of SPR with drawdowns from reserves by other IEA member countries.