It has been nearly twenty years in the making, but the AI-fueled forecast for electrical power, and for natural gas to generate that power, combined with increased LNG exports, has put gas back into the spotlight. This renewed interest is in sharp contrast to natural gas being routinely flared or disposed of in other ways in years past.

This effect is illustrated in the EIA’s current Short-Term Energy Outlook,¹ where the government forecast deviates from the NYMEX futures pricing, illustrating the risks looking ahead.

As oil prices continue to decline to levels below the $65 per barrel target breakeven price for new wells, this will reduce the future quantities of natural gas produced. What is one path of action that would reward E&P companies for continuing to drill, ensuring adequate future quantities of natural gas? Begin to refill the Strategic Petroleum Reserve (SPR).

SPR History

The idea of maintaining a national emergency stockpile of oil in the U.S. actually dates back to the 1940s and 1950s: as early as 1944 the Department of the Interior identified the concept of storing crude for emergencies, and by 1956 the experience of the Suez Crisis prompted further consideration.² Now, caverns within salt formations prevent oil inventories from leaking or migrating under the ground while in storage.

But it was the oil embargo of 1973-74 — when the Organization of the Petroleum Exporting Countries (OPEC) cut off supplies to the U.S. in retaliation for U.S. support of Israel during the Yom Kippur War — that really galvanized U.S. energy policy.³ In response, Congress passed the Energy Policy and Conservation Act (EPCA) in December 1975, which formally created the SPR with the goal of holding up to approximately 750 million barrels of crude oil in strategic underground storage caverns. Initial fill deliveries began in 1977.⁴

Over the subsequent decades the SPR has become a critical component of U.S. energy security, and its storage sites (located in salt-dome caverns along the Gulf Coast of Texas and Louisiana) were chosen for their proximity to refineries and pipelines.⁵ The reserve reached its peak inventory in December 2009 when it held about 726.6 million barrels. Since then, its role has evolved: beyond purely a cold-war era shock absorber for supply disruptions, it now functions also as a tool in responding to hurricanes, geopolitical crises, and domestic fuel-price spikes.⁶

SPR Drawdowns

The graph below shows the volumes of oil in the SPR over time:⁷

U.S. Ending Stocks of Crude Oil in SPR

Over the past decade, the U.S. SPR has seen significant drawdowns, especially under the Biden administration. The SPR's level is currently far below its historic average, and while plans to restore these reserves are in motion, it will take years to reach prior levels.⁸

• Since 2015, Congress repeatedly mandated sales of SPR oil to help fund federal spending, resulting in multiple drawdowns.
• President Biden authorized the largest SPR release in history, releasing 180 million barrels beginning March 2022 to stabilize oil prices amid the Russian invasion of Ukraine and supply concerns. By late 2023, nearly 45% of SPR stocks had been released since early 2021, dropping the reserve to its lowest level in over 40 years, at around 352 million barrels in 2023 (down from over 638 million barrels at the end of 2020).⁹
• The Biden's administration attempted to refill the SPR with a target price of $79 per barrel, but rising market prices mostly prevented meaningful repurchases.¹⁰
• As of mid-2025, the SPR stands at about 402 million barrels, much lower than previous years, representing about 57 days of U.S. import coverage compared to over 90 days in 2021.

Trump Administration’s Plans to Refill the SPR

In 2020, as oil prices collapsed due to COVID-19, President Trump directed the DOE to fill the SPR, but Congress blocked the funding for these purchases. Despite this, the Trump administration is beginning to refill the SPR, planning to purchase one million barrels in December and January, using $171 million funded via new legislation. This is a small step, amounting to a symbolic move in a reserve that once held 700 million barrels.¹¹

• The government aims to take advantage of lower spot crude prices, with bids due soon, and initial deliveries targeted for the Bayou Choctaw site in Louisiana.
• Energy policy experts caution that full replenishment could take years and require up to $20 billion, especially if oil prices remain high. Congress recently approved $1.3 billion for additional refills and maintenance and repealed some mandated drawdowns that previously reduced SPR holdings.¹²
• The Trump administration's plan reflects a focus on restoring SPR levels for national security, reversing the previous drawdowns seen as politically motivated. Executive voices in the energy sector have praised this move as a good start towards rebuilding energy independence.¹³

Refill the SPR with U.S. Produced Oil or Foreign Oil Imports?

In the short-term, using U.S. production to refill the SPR makes economic sense, although using foreign oil would increase the volumes of U.S. oil available in the long term. However, using foreign oil to refill the SPR has notable downsides, largely related to security, refinery compatibility, economic impacts, and long-term risks.

Purchasing foreign oil for the SPR exposes the U.S. to supply disruptions and potential leverage from international producers, especially during periods of geopolitical instability or embargoes. If global oil flows are interrupted (e.g., by continuing Middle East tensions), access to required grades of oil could become compromised quickly, making the SPR less reliable in true emergencies. In short, using foreign oil to refill the SPR would increase its total volume, but it raises vulnerabilities in emergency scenarios, potentially mismatches supply to refinery needs, and weakens domestic energy security and economic stability.

As noted previously in previous editions of this blog, oil prices are expected to decline next year, while demand for natural gas continues to increase as AI data centers become operational and the surge in the LNG exports becomes a reality. Meeting this demand for gas requires that future natural gas and oil wells are drilled regularly to replenish declining production levels.

Approximately 37% of U.S. natural gas production comes from wells that are primarily oil wells,¹⁴ also known as associated natural gas wells. These wells mainly produce oil but also produce significant quantities of natural gas as a byproduct. This associated natural gas production comes mainly from major oil-producing regions such as the following:

• Permian Basin
• Bakken
• Eagle Ford
• Anadarko
• Niobrara

Choosing to replace the oil taken from the SPR by committing to purchase additional U.S. production would help ensure an adequate supply of natural gas while protecting the oil industry’s required margins to drill for new reserves.

WTI Strip Prices Increase

Spot prices and futures prices for the West Texas Intermediate (WTI) contract increased approximately $3.00 per barrel in the near term and decreased approximately $0.25 over the longer term.

WTI Strip Prices - One Month Change

As shown, after the expectation of lower near-term pricing, the oil price curve is shifting to a state of “contango,” reflecting the market’s expectation of higher future spot prices over the longer term.

Oil Price Outlook

The price distribution below shows the crude oil spot price on November 17, 2025, as well as the predicted crude oil prices based on options and futures markets. Light blue lines are within one standard deviation (σ) of the mean, and dark blue lines are within two standard deviations.

WTI Crude Oil $/BBL

Based on these current prices, the markets indicate there is a 68% chance oil prices will range from $51.50 and $70.50 per barrel in mid-February 2026. Likewise, there is roughly a 95% chance that prices will be between $38.50 and $91.50. By mid-April 2026, the one-standard deviation (1σ) price range is $49.00 to $73.50 per barrel, and the two-standard deviation (2σ) range is $34.00 to $102.50 per barrel.

Insights

Remember that while option prices and models reflect expected probabilities rather than certain outcomes, they still remain a useful tool for assessing market expectations and risk. Throughout most of 2023 and 2024, crude oil spot prices generally fluctuated within the range of $70 to $90 per barrel. During that period, we observed general increases in futures price volatilities as prices approached the upper and lower bounds of that range. In 2025, crude oil spot prices generally remained below that range. For mid-April 2026 pricing as of November 17, 2025, the 1σ range had a spread of $24.50 per barrel, and the 2σ range had a spread of $68.50 per barrel, indicating a general decrease in spreads as prices have begun to stabilize within the range of $60 to $70 per barrel.

1. Short-Term Energy Outlook, U.S. Energy Information Administration, webpage.
2. SPR Origins, U.S. Department of Energy, webpage.
3. Noah Berman, “How Does the U.S. Government Use the Strategic Petroleum Reserve?”, Council on Foreign Relations, January 11, 2023.
4. Strategic Petroleum Reserve Project Number DE-DT0000358, U.S. Department of Energy. Last Reviewed Date: October 31, 2011.
5. “History of the Strategic Petroleum Reserve,” U.S. Department of Energy, webpage, July 1, 2015.
6. “SPR Quick Facts,” U.S. Department of Energy, webpage.
7. “Petroleum & Other Liquids,” U.S. Energy Information Administration, webpage.
8. Audrey Streb, “Trump admin planning to refill depleted petrol reserve Biden drained,” CFACT, October 25, 2025.
9. Larry Goldstein, Lucian Pugliaresi, Max Pyziur, Matthew Sawoski, “Running on Empty Revisited: U.S. Strategic Petroleum Reserve Continues to Decline to Historic Lows,” Energy Policy Research Foundation, presentation, October 11, 2023.
10. “Biden-Harris Administration Makes Final Purchase for the Strategic Petroleum Reserve - Secures 200 Million Barrels at a Good Deal for the American Taxpayer,” U.S. Department of Energy, November 8, 2024.
11. “Energy Department Issues Solicitation to Purchase Crude Oil for the Strategic Petroleum Reserve,” U.S. Department of Energy, October 21, 2025; Ari Natter, “Trump to Buy 1 Million Barrels to Help Refill Oil Reserve,” Bloomberg, October 21, 2025.
12. Julianne Geiger, “U.S. Buys a Token Barrel to Refill the Strategic Reserve,” Oilprice.com, October 21, 2025.
13. Kristen Altus, “Energy titan Harold Hamm praises Trump’s move to refill oil reserve, warns of ‘price shock’ if US stalls,” Fox Business, October 24, 2025.
14. The U.S. Energy Information Administration (EIA) defines oil wells as those with a gas-to-oil ratio (GOR) of less than or equal to 6.0 thousand cubic feet of natural gas per barrel of oil produced, distinguishing them from wells predominantly producing natural gas.