Renewed hostilities in the Middle East are again roiling global energy markets.
Brent crude, the global benchmark, hit $100 per barrel on Wednesday. West Texas Intermediate crude, the North American benchmark, surpassed $95 per barrel, while U.S. average retail gasoline prices hit $4.22 per gallon as diesel rose to $5.94 per gallon.
The high costs of distillates, which include diesel and heating oil, are bound to pressure inflation higher as inventories shrink during the harvest season and as winter approaches.
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This comes as the level of the U.S. Strategic Petroleum Reserve continues to drop toward precariously low levels, leaving the U.S. and its trading partners in precarious positions.
After two years of recovery in 2024 and 2025, the U.S. in March authorized a release of 172 million barrels from its crude oil reserves, held in caverns in Texas and Louisiana. It was part of a coordinated global effort to reduce the impact of the global energy shock.
Now, after a drawdown of approximately 130 million barrels, the reserve has about 285 million barrels, which is 33 million barrels above the congressionally mandated minimum of 252.4 million barrels. The reserve has a capacity of 713.5 million barrels.
Source: Department of Energy; RSM
If the current authorized release is completed in full, it would bring U.S. crude oil reserves 9 million barrels below that minimum and at the lowest level since 1982.
Further drawdowns would not only require Congressional permission but also raise concerns about possible damage to the caverns.
The weekly and monthly SPR drawdown pace has slowed as Strait of Hormuz flows have improved, bringing the prospect that these minimums will not be tested.
Established in the aftermath of the 1970s oil embargoes, reserves reached 100% of the Congressional authorized requirements at the end of 2009. The system was operating at 90% of capacity until the 2021 pandemic supply shock. That was followed by the coordinated reserve releases by Western allies in response to the 2022 cutoff of Russian supplies.
The current release is a “loan” to buyers, with buyers obligated to repay the loans with interest (additional crude) to help rebuild the reserve. But the loans are not due to be fully repaid until September 2028, leaving the U.S. exposed to further oil shocks in the meantime.
The takeaway
Global inventories of petroleum products were drawn down during the shutdown of the Strait of Hormuz, causing a global increase in energy prices. To moderate the loss of supply, nations have been dipping into their reserves.
In the U.S., those reserves are perilously close to minimum levels, raising additional concern for household and business affordability as the war drags on.
