A new role for the SPR. It wasn’t designed for that.

By Wolf Richter for WOLF STREET.

Crude oil prices continued their plunge after a memorandum of understanding was agreed to between the US and Iran over the weekend. Both sides said that the Strait of Hormuz would reopen as soon as the MOU is signed.

Futures for the benchmark grade West Texas Intermedia (WTI) fell by nearly 5% today to about $80 per barrel at the moment, the lowest since March 5, and down by about $35 from the peak during the Iran-war spike on April 6.

Prices between $60 to $80 per barrel are where US frackers can operate profitably without causing further demand destruction that would come on top of the long-running structural demand decline for gasoline in the US.

This structural demand decline for gasoline in the US has been going on for years, as motor vehicles became more efficient, as hybrid power trains and EVs gained market penetration, and as per-capita miles driven has been dropping for over two decades, reducing US gasoline consumption in 2025 to where it had first been in 2003.

When overproduction and the subsequent oil glut hit US producers and prices plunged, it triggered two oil busts – or maybe two waves of the same oil bust – over the past decade, during which hundreds of frackers filed for bankruptcy.

Despite substantial overall inflation over the past 20 years, the worst crude oil price spike occurred in 2008, when WTI briefly kissed $150. The price spikes in 2022 and this year never reached those levels.

Government uses the SPR as cudgel to beat down Oil-Price Mania.

One of the tools that the US government and other major governments around the world, including China, now have to put a lid on price spikes are their Strategic Petroleum Reserves.

The SPR in the US was created in response to two massive oil shocks in the 1970s when the US was dependent on crude oil imports from OPEC. The idea was to give the US some reserves that, in addition to its own production, would prevent the US from running out of oil for a period that would be long enough to line up alternatives.

But about two decades ago, fracking in the US became a major force. Over the years, the US became the largest natural gas producer in the world, the largest crude oil and petroleum products producer in the world, the largest exporter of LNG in the world, a major exporter of crude oil and of value-added petroleum products, including gasoline, diesel, and jet fuel – even refineries in California. It became a net exporter of crude oil and petroleum products, importing crude oil to refine and exporting the value-added product, such as gasoline, diesel, and jet fuel. And over 60% of the crude oil that US refineries do import comes from Canada and Mexico (see charts at the bottom of this article, and analysis and charter here).

This raised the question about 10 years ago what to do with the SPR since it wasn’t needed anymore to avoid shortages. Starting in 2017, under the Trump administration, the US began slowly draining the SPR for that reason. Between 2017 and the end of 2020, the SPR was reduced by 8.2%.

Then came the war in Ukraine when oil prices spiked in the US, as US production was by then connected via massive exports to global markets. And this changed the purpose of the SPR from preventing shortages to beating down speculative manias. The Biden administration dumped large amounts of crude oil on the market to push prices back down. After prices had calmed down, the SPR was being slowly refilled at lower prices than the prices at which the crude oil had been sold during the release. Sell high, buy low.

The Trump administration has been doing the same during the Iran war. The SPR dumped large amounts of crude oil on the market very quickly, putting a lid on the speculative price spike in the US, and pushing prices back down.

The level of SPR level has now dropped by 75 million barrels, to 340 million barrels, as of June 12. More than the entire amount that had been refilled between mid-2023 and early March 2026 has been dumped back on the market in three months.

Summary of US production, imports, and exports.

US crude oil production has risen by 172% since 2008, to a record 13.6 million barrels per day (MMb/d) in 2025.

The two kinks in the chart in 2016 and then again in 2020-2021 were the results of the two Oil Busts when overproduction caused the price of US crude oil to collapse. As hundreds of oil-and-gas drillers filed for bankruptcy, production declined, which allowed the price to rise again into a survivable range.

Net exports (exports minus imports) surged in 2025, as exports of crude oil and petroleum products were roughly stable at 10.7 MMb/d and up by 495% from 2008 (red), while imports declined to 7.9 MMb/d, after having peaked at nearly 13.7 MMb/d in 2005 (blue).

Exports of petroleum products rose to 6.73 MMb/d, accounting for 63% of total exports. Exports of crude oil declined by 2.9% in 2025, to 3.99 MMb/d, accounting for 37% of exports.

Importing crude oil, refining it, and exporting the value-added product is a huge profitable business for refiners in the US.

Even refineries in “oil island” California are doing it. With local demand on a long downward trend, what else should refineries do with their refining capacity? California produces some crude oil. Refineries also buy some from Alaska and foreign countries, and some from US producing regions brought in by oil train. California refineries then export some of the gasoline, distillate, and jet fuel mostly to Latin America. West Coast (PADD 5) refiners exported 0.41 MMb/d to other countries in 2025.

Among the many petroleum products that the US exports are finished petroleum products, the largest categories of which are by export volume:

• Distillate: 1.26 MMb/d
• Gasoline: 0.80 MMb/d
• Petroleum coke: 0.54 MMb/d
• Jet fuel: 0.22 MMb/d

Imports from countries other than Canada and Mexico: Over 60% of the crude oil that the US imported in 2025 came from Canada and Mexico. Refiners purchase crude oil wherever it’s the best deal. Russia, never a large source, fell off the list in 2022. OPEC only provided 14% of US imports. Saudi Arabia is shown separately here, but is also included in OPEC imports.

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