Iran War Impact: US Strategic Oil Reserves Fall to 44-Year Low

The United States’ Strategic Petroleum Reserve (SPR) has fallen to its lowest level in 44 years as the Iran war and disruptions in oil shipments through the Strait of Hormuz continue to affect global energy supplies.

According to international media reports, the US withdrew another 5.3 million barrels of crude oil from its strategic reserves last week. After the withdrawal, the stockpile fell to around 293.4 million barrels.

The Wall Street Journal reported that this was the lowest level since late 1982. Reuters also reported on August 17 that US emergency crude oil reserves had fallen to their lowest level since 1982.

The US has continued releasing oil from its reserves as shipping through the Strait of Hormuz has been severely disrupted. The decline in the reserves has taken place during the ongoing Iran war.

After the United States and Israel launched the war against Iran in late February, the movement of oil and petroleum products through the Strait of Hormuz was heavily affected.

The International Energy Agency (IEA) says around 20 million barrels of crude oil and petroleum products passed through the Strait of Hormuz every day before the war. This represented about one-quarter of global seaborne oil trade.

The sharp decline in oil shipments through the strait increased concerns about global supply shortages. In response, the US and other IEA member countries decided to release oil from their emergency reserves.

US Pledged to Release 172.2 Million Barrels

On March 11, the 32 member countries of the IEA agreed to release 400 million barrels of oil from their emergency reserves. It was the largest coordinated oil stock release in the agency’s history.

The US pledged the largest share, agreeing to release 172.2 million barrels from its strategic reserves. This amount was more than half of the reserve’s current volume at the time.

In July, the US Strategic Petroleum Reserve had already fallen to around 316.5 million barrels, its lowest level since April 1983.

After the latest withdrawals, the reserve has now fallen further to about 293.4 million barrels, meaning several tens of millions of barrels have been removed within a few weeks.

According to the IEA, oil exports through the Strait of Hormuz fell to less than 10% of their pre-war level after the conflict began.

Purpose of the US Strategic Petroleum Reserve

The US Strategic Petroleum Reserve is the world’s largest government-owned emergency crude oil stockpile.

It was created to help the country deal with major oil supply disruptions caused by war, natural disasters or other emergencies.

Under US law, the reserve has the capacity to hold up to 1 billion barrels of petroleum. However, continued withdrawals during the current crisis have pushed the stockpile to historically low levels.

Why the Low Reserve Level Matters

The current level of the US Strategic Petroleum Reserve is significant because it has fallen to its lowest point in more than four decades.

The reserve was reported at around 316.5 million barrels in July, while the historical low recorded in 1982 was around 275 million barrels. The current level is now getting closer to that record low.

This means that if the US faces another major global oil crisis in the future, the government will have fewer emergency supplies available to quickly support the market.

Major Energy Challenge for the US

The IEA has said that the release of 400 million barrels provides temporary support to global oil markets, but the long-term solution is the restoration of normal oil shipments through the Strait of Hormuz.

The fall in the US Strategic Petroleum Reserve to around 293.4 million barrels therefore reflects not only a decline in US emergency stocks but also the wider impact of the Iran war and the disruption in the Strait of Hormuz.

If the Hormuz crisis continues for a longer period, the US could face pressure from higher fuel prices while also dealing with the challenge of rebuilding its rapidly declining emergency oil reserves.