Doomsday Reserves: Will the US strategic reserves save the oil market
Against the backdrop of the protracted air campaign in the Middle East and the de facto blockade of the Strait of Hormuz, the US administration has decided to re-open the Strategic Petroleum Reserve (SPR). Other member countries of the International Energy Agency (IEA) are preparing for similar measures. Politicians are trying to stave off panic with interventions, but will the reserves of developed and developing countries be enough to cover the deficit? Izvestia has figured out whether it is possible to fill the largest oil crisis of recent decades with reserve oil.
It's for the New Year
The U.S. Strategic Petroleum Reserve is the world's largest crude oil reserve stored in underground salt caves in Texas and Louisiana. It was established in the mid-1970s as a direct response to the Arab oil embargo. The original philosophy of this tool was to use it exclusively in the event of catastrophic disruptions in physical supplies — due to wars or devastating hurricanes.
Washington is using this tool for the second time in a very short period of time. In 2022, the White House has already withdrawn an unprecedented 180 million barrels from storage to combat inflation and high gasoline prices in the country. Attempts to replenish the reserve in subsequent years were extremely slow due to budget constraints and unwillingness to overpay on the open market.
By the beginning of the Middle East war in 2026, the American "pot" had reached an exhausted state. Of the design capacity of 714 million barrels, just over half remained in storage. In theory, up to 4.4 million barrels can be pumped from them, but various technical limitations (pipeline capacity, terminals, etc.) reduce these capabilities to about 1-1.5 million barrels per day for several months.
In addition to the United States, other importers are coming to the market's aid. According to the IEA rules, member countries are required to maintain oil reserves equivalent to 90 days of net imports. Japan, South Korea, the United Kingdom and the EU countries have already agreed on a coordinated release of raw materials from their storage facilities. Japan has about 380 million barrels, South Korea — about 90 million.
China stands apart, which is not a member of the IEA, but has the world's largest commercial and government reserves (according to various estimates, about 1 billion barrels). Beijing has also begun to gradually bring oil to the domestic market to compensate for the stoppage of supplies from Iran and Saudi Arabia.
The black hole
To understand the inefficiency of reserve interventions, it is necessary to estimate the size of the hole in the global balance. The head of the IEA, Fatih Birol, recently stated that the world is facing the largest interruption in oil supplies in history, surpassing the shocks of 1973 and 1979.
Under normal conditions, about 20 million barrels of oil and petroleum products pass through the Strait of Hormuz every day, which is one fifth of global consumption. Due to the fighting, drone attacks, and insurers' refusal to cover shipping risks, this flow has stopped.
Backup pipelines in Saudi Arabia (East – West) and the United Arab Emirates (Habshan Fujairah) are capable of redirecting 6-7 million barrels per day at most, bypassing the strait, and the ports of shipment still remain at risk. As a result, the global market physically lost from 10 to 14 million barrels of daily supply. The modern economy has never known such a deficit. The IEA estimates a loss of 9 million barrels in March, but this figure may still be revised.
The mathematics of coordinated fuel release to the market is quite simple. If all the IEA countries join forces, they will be able to supply an additional 2-3 million barrels per day to the market. Together with the American quota, this will give a maximum of 4-4.5 million barrels of new supply. This covers from a third to a half of the dropped volumes from the Persian Gulf. Moreover, these interventions are limited in time: reserves can be printed within three to four months, after which the level of reserves in developed countries will fall to a critical level, posing a direct threat to national security.
We can handle 130
If the war in the Middle East drags on for another month or two and shipping in the Strait of Hormuz is not restored, the oil market will begin to enter the rationing phase. Interventions from the SPR are now working as a sedative for traders, keeping Brent quotes from immediately going above $120-130 per barrel. But as refineries in Asia and Europe begin to feel the physical shortage of tankers to load their installations, these efforts will become insufficient.
In the coming weeks, we will see the exhaustion of the deterrent effect from the sale of reserves. The price of oil will be forced to rise to those levels where the mechanism of large-scale destruction of demand will be triggered. This means a forced shutdown of energy-intensive industries, a sharp drop in logistics activity and a reduction in fuel consumption by the population of developed countries.
Under current conditions, no reserves can replace the existing infrastructure of the Persian Gulf. By printing off strategic reserves, the United States and Europe are only buying time in the hope of an early diplomatic or military resolution to the crisis. If this calculation fails, by the summer of 2026, the global economy will face a price shock that is guaranteed to plunge key regions of the planet into a deep recession or trigger a new round of global inflation. However, it is possible that we will see both at the same time.
Russia is benefiting from the situation, as the United States is already easing sanctions against Russian oil. And the net price increase generates billions of dollars of revenue per month for the budget and twice as much for the economy as a whole. However, global inflationary surge, recession, and demand disruption are unlikely to be beneficial to anyone in the longer term.
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