Why Trump’s Move to Lower Oil Prices Fell Flat

It will take time for the largest-ever release from global stockpiles to work its way into the oil market

By Carol Ryan of The WSJ. Excerpts:

"strategic reserves take longer to unlock than commercial stocks, especially if they are in specialized storage facilities. 

The U.S. SPR holds 415 million barrels of crude in 61 underground salt caverns in Louisiana and Texas. But it will be hard to get it out quickly. The Biden administration made a similar-size draw at the start of Russia’s full-scale invasion of Ukraine in 2022, which left the store at just 60% capacity. As more oil is extracted, pressure levels in the caverns fall, which slows subsequent withdrawals.

The SPR also uses the same pipelines and ports as shale producers, so infrastructure to carry the extra oil is constrained. It will take four months to get the full amount to market."

"The SPR was set up after the 1973 oil crisis to prevent the U.S. from running out of physical barrels, rather than to intervene in global oil prices. Such a shortage is unlikely now that the U.S. is the world’s biggest oil producer. From a physical supply perspective, North America is the best-supplied region in the world right now, but is still exposed to the economic fallout of rising global energy prices."

"Releasing barrels from finite stocks has less effect on the oil price than an output increase by the Organization of the Petroleum Exporting Countries normally would"