Getty Images FILE – In an aerial view, the Strategic Petroleum Reserve storage at the Bryan Mound site is seen on October 19, 2022 in Freeport, Texas. The Iran war has pushed oil prices higher over the past several months. From around $60 per barrel in early February, it reached a peak of $113 per barrel in April, before settling down to just under $80. This sent the cost of gasoline at the pump to above $5 per gallon in some areas. It also impacted the cost of goods and services, pushing inflation to its highest level since April 2023.
Recently, the president authorized 172 million barrels of oil to be released from the Strategic Petroleum Reserve. Though this action has been justified as a means to reduce the pain of higher prices for consumers, a closer analysis suggests that it is a smart business decision, with little downside risk.
Recall that Congress created the reserve in 1975 in the aftermath of the 1973-1974 oil embargo, to dampen short-term oil shortages. The current capacity is 714 million barrels, as set by Congress. Historically, its peak capacity was 727 million barrels back in December 2009. In 2025, the reserve was at 413 million barrels. By the most recent count, June 12, it was down to 340 million barrels, its lowest level in more than 40 years.
The United States is the world’s largest consumer of oil. In 2025, it consumed 20.6 million barrels of oil each day on average, the highest level since 2007. To meet this need, the U.S. is also the largest producer of crude oil in the world. Given that there are different types of crude oils (light versus heavy, sweet versus sour), the U.S. both imports and exports oil to get the right balance of oil types based on what domestic refineries can efficiently process. The largest share of imported oil comes from Canada and Mexico, while Asia, Europe, and both Central and South America are the primary export targets for U.S.-produced oil.
This means is that the disruption of oil tankers passing through the Strait of Hormuz has limited impact on domestic oil supply, even though it has significantly impacted global oil markets. Once the flow of oil tankers through the strait was halted, the price of oil surged, pushing domestic gasoline prices higher — with oil companies reaping the rewards.
Releasing oil from the Strategic Petroleum Reserve made no sense if the sole objective was to meet domestic demand. The majority of the reserve holds light crude oil, while domestic refineries are configured for heavy oils. The only benefit of releasing light oil from the strategic reserve was to export such oil (and for oil producers to take advantage of the higher prices). To profit from this deal, the government arranged a swap with oil producers, who will return 1.25 barrels of oil for every barrel received from the reserve. Releasing such oil, valued at $90 or more per barrel, is a shrewd business transaction.
The world has changed since the 1973-1974 oil embargo. In March 1973, the U.S. produced just over 9.2 million barrels of oil per day, while in March 2026, it produced more than 13.6 million barrels per day, an increase of nearly 50 percent. By comparison, consumption has increased by just over 30 percent during a similar time period.
Through the end of 2024, there were around 46 billion barrels of proved reserves in the United States. Though such oil is not immediately available and its type mismatches what refineries can efficiently process, its very existence provides a buffer against long-term supply disruptions. Moreover, the size of the Strategic Petroleum Reserve in terms of daily consumption is small. If oil production suddenly dropped to zero — a highly improbable event — 700 million barrels would barely cover five weeks of demand.
The existence of an oil reserve is prudent, in support of our nation’s energy security. Given the state of the nation in terms of energy independence, drawing down the strategic reserve at this time was a sound business decision. The plan to restore it over the next year, when oil prices will invariably be lower, with an extra 40 million barrels added to the reserve, will complete the transaction, effectively adding oil at no cost to taxpayers — a win-win situation for all.
Sheldon H. Jacobson, Ph.D., is a professor of Computer Science at the University of Illinois Urbana-Champaign. He applies his expertise in data-driven risk-based decision-making to evaluate and inform public policy.
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