As we have detailed in depth over the past few days (here, here, and here), the Biden administration is utterly desperate to stop retail gasoline prices soaring as the president's approval rating plunges ever lower.
So desperate that last night we reported that Biden had reportedly asked President Xi to release some of China's Strategic Petroleum Reserve (which we remarked and JPMorgan has confirmed was "highly unlikely" to happen).
The decision to ask China to join a coordinated global SPR release seemed odd at the time of reporting... but now we may know why Biden was forced to do it.
It turns out that the US SPR has seen drawdowns for 10 straight weeks, during which more than 15 million barrels of crude have been withdrawn.
At 606 million barrels, SPR is at its lowest since 2003, and it seems more declines are on the horizon.
As Bloomberg's Julian Lee points out, the withdrawal of 3.25 million barrels from the SPR is the biggest in more than a decade.
Not since the coordinated release of emergency reserves in September 2011, following the Libyan uprising, have we had this much taken out of the storage caverns in a single week.
It is clear that the much talked-about SPR draw is happening by stealth, despite U.S. House Majority Leader Steny Hoyer saying he is not in agreement with Senate Majority Leader Chuck Schumer's call for tapping the strategic oil reserve to lower gas prices, saying he believed the reserve was there to be used if there is a collapse in supply in times of emergency.
"I'm not in agreement with that. I think that the Strategic Petroleum Reserve is not for a raise in prices, it's for a collapse in supply at times of emergency, i.e. a conflagration in the Middle East which essentially shuts off supply," Hoyer told reporters when asked if he agreed with Schumer's comments.
Too late, Steny - it already happened!
So what the hell is going on? 10 straight weeks of SPR drawdowns and prices for gas at the pump have risen over 7%.
That also explains why Biden has suddenly shifted his attention to 'gouging' and blaming fossil fuel companies, and away from an SPR release.
Oh and finally, remember when President Trump suggested an SPR release in 2018? Here's how CNBC reported it:
If Trump were to tap the Strategic Petroleum Reserve, it would be the first time that an SPR release was deliberately planned in advance.
Experts say this would set a precedent. Antoine Halff, senior research scholar and the head of the program on global oil markets at Columbia University’s Center on Global Energy Policy, said the SPR was never officially or explicitly intended as a tool of price management in order to reduce oil prices.
Concerns about rising oil prices are real and “self-inflicted,” Halff said, due to the government’s Iran policy. But if Trump were to use the SPR in an attempt to alleviate the impact of sanctions and reduce gas prices in the United States, it isn’t likely to work.
Scott Montgomery of the Henry M. Jackson School of International Studies at the University of Washington said tapping the SPR would be “foolish and an extraordinarily bad precedent.”
He believes that using the SPR to manipulate prices, especially ahead of an election, would turn the SPR into a political weapon and likely lead to new restrictions on its use.
We wonder what Mr.Montgomery and Mr. Halff think about President Biden's biggest SPR release since 2011!