The United States put up to 40 million barrels from its Strategic Petroleum Reserve up for sale on Tuesday, the final tranche of a 172-million-barrel release, while Energy Secretary Chris Wright publicly pressed European governments to deliver the emergency oil they pledged but have not shipped.
“While the United States and Japan are delivering on their commitments, several European member countries have released only a fraction of the crude oil and petroleum products they pledged,” Wright said on September 29. “We urge every member country to fulfil its commitments.” The International Energy Agency coordinated a 400-million-barrel release in March, right after the US and Israeli strikes on Iran on February 28, with the EU contributing roughly 20 percent of the total.
IEA executive director Fatih Birol, speaking at an energy ministerial in Dublin shortly before Washington’s call, played down the prospect of another coordinated release. About two-thirds of the pledged emergency oil has reached markets, he said, and the remaining third is still in transit. Another coordinated release is not currently a priority, in his assessment, because the bottleneck is delivery of existing pledges rather than the size of the commitment.
The reserve is running dry
The final 40-million-barrel offering pushes the Strategic Petroleum Reserve toward its lowest level since 1982. The reserve has been drawn down through an emergency release and a series of loans to refiners since the Gulf war disrupted shipments through the Strait of Hormuz. Refilling it at current prices would cost multiples of what the government received for the barrels it loaned, which is why the administration has avoided committing to a timeline for repurchase.
Legislation governs how the reserve can be refilled, and sales at crisis prices complicate the accounting. Energy Department officials have said in past testimony that buybacks are paced to avoid moving the market, which effectively rules out a fast rebuild while prices stay above $90. The reserve’s operational role has also narrowed: at these levels it can no longer absorb a large multi-month supply shock, only a short one, and traders know it.
| Item | Figure |
|---|---|
| Final SPR tranche offered | Up to 40 million barrels |
| Total release program | 172 million barrels |
| IEA coordinated release, March | 400 million barrels |
| US diesel price | Near $7 a gallon |
| Brent range since late September | $97 to $102 a barrel |
Diesel is the political problem
Diesel is where the price pressure bites hardest. US diesel has surged to around $7 a gallon, roughly 70 percent above prewar levels, and the administration is weighing a 90-day diesel export ban ahead of November’s midterm elections. Interior Secretary Doug Burgum told reporters the administration was “discussing a lot of options” and that European countries “have a lot of diesel reserves,” but declined to commit to any specific step.
The export ban idea has drawn criticism from both sides of the Atlantic. Ireland’s Energy Minister Darragh O’Brien called it unlikely because it would damage economies on both sides, while urging Europe to prepare for the possibility anyway. Francesco Sassi, a researcher at the University of Oslo, told Euronews that a ban would mean costlier supply for European consumers and higher costs for industry and energy operators, and warned that prolonged disruption could push Europe to reconsider Russian energy supplies.
A ban would also restructure flows that currently help keep European diesel prices from rising further. US Gulf Coast refiners export a large share of their distillate output to Europe and Latin America. Cutting that off for 90 days would add supply at home and subtract it abroad, which is precisely the tradeoff the election calendar is forcing on the administration. Refiner shares have already been volatile on the speculation.
Markets are watching Hormuz flows
Oil traders have been tracking physical flows more than headlines. Trump said this week that oil movements through the Strait of Hormuz have recently increased, and Goldman Sachs estimates the market was roughly balanced in September. Saudi Arabia has restored flows along its East-West pipeline to about half their previous levels, and other Gulf exporters have raised shipments. Brent fell 2.6 percent to $102.59 on Tuesday before recovering above $103 on Wednesday as talks between US and Iranian officials stalled again.
The mixed signals have left prices swinging in a wide band. Brent traded between $97 and $102 for much of late September, $25 to $30 above prewar levels, and the front-month contract is on track for its biggest monthly gain since July. Shipping disruption in the Gulf of Aden and continued attacks on Russian refineries have added risk premium even as Gulf exports recover.
European consumers are absorbing the cost. EU Energy Commissioner Dan Jorgensen said the union paid more than 100 billion euros in additional costs this year for the same volume of oil and gas it imported before the war. The figure has become the core of the Commission’s argument for accelerating the exit from imported fossil fuels, though member states have differed on how fast to move while prices are this high.
With the SPR nearly empty and Europe’s pledges only partly delivered, the market’s safety net is thinner than at any point since the war began in February. Traders say the next leg of the oil price will depend less on diplomacy than on whether Gulf export levels hold through the winter, when Northern Hemisphere demand peaks and any new disruption would hit a market with little spare buffer. The IEA’s next monthly report, due mid-October, will show whether the pledged barrels still in transit actually arrive before the heating season.