STEVE INSKEEP, HOST:
OK. The U.S. release of oil from the Strategic Petroleum Reserve is part of a coordinated global effort. Multiple countries are putting oil on the market in a bid to stabilize prices. John Kilduff is watching all this. He is an energy analyst and founding partner of Again Capital. Welcome to the program.
JOHN KILDUFF: Good morning. Thank you for having me on.
INSKEEP: For those who've maybe just heard the name, or not even that, what is the Strategic Petroleum Reserve? Where is it? How's it work?
KILDUFF: Well, it's literally 40 salt caverns along the coast of Texas and Louisiana where crude oil has been placed. Right now there's about 415 million barrels across those caverns, and we can take out 1 to 2 million barrels a day. And the current administration plan over the four months amounts to about 1.2 to 1.5 million barrels a day over the course of four months.
INSKEEP: And does the U.S. government just sell it on the open market?
KILDUFF: The U.S. government will put out tender offers or make the crude oil available, and then companies and brokers will come to the U.S. government and make offers on that crude oil.
INSKEEP: You just gave me a number that suggests to me why this may not make that much of a difference. You said the U.S. can put out 1 or 2 million barrels of oil per day. There are other countries also putting out some oil, but we have a matter of 20 million barrels per day that is not flowing through the Strait of Hormuz.
KILDUFF: And that is exactly the problem. This is too big a hole to fill, too big a mountain to climb. Pick your analogy. These measures are welcomed. They certainly should do it. It should allow to help us avoid spot shortages, physical shortages or a lack of crude oil, but it will not do very much at all to calm down the commodity market and the overall price of crude oil.
INSKEEP: And I guess we should be clear - this is a global market. So even though the United States produces plenty of oil for itself, oil prices are going to rise in the United States as well as everywhere else. Is that right?
KILDUFF: That is exactly right. That's because the global market is - has lost now upwards of 20% of its supply. And the United States, nor anywhere else, can make that up.
INSKEEP: I'm thinking about the strategic implications of this because President Trump has said in recent days we can stop this war whenever we want. His theory is we haven't put troops on the ground. We're not bogged down. We're bombing targets, and when we're done bombing targets, we can stop. Trump says, I can stop when I want. But it seems that Iran has this chokehold in the Strait of Hormuz that the United States can't do very much about at the moment, and as long as Iran has that, Iran can continue the war as long as it wants. Am I right?
KILDUFF: That is the big problem here. We may stop shooting, but will the Iranians stop shooting? And it is a bit of a mystery to me that we can't muster the resources necessary to secure the strait and allow the transit of all these vessels, but here we are.
INSKEEP: You're saying that you think the United States, with the most powerful navy in the world, should have been able to secure that zone?
KILDUFF: Historically, they have provided escorts. During the tanker war in the 1980s between Iran and Iraq, they've done exactly that. But this time around, Iran's capabilities seem to be at a level that is making the U.S. Navy right now uncomfortable or unwilling to provide escorts of ships through the strait.
INSKEEP: Drones and missiles. John Kilduff is an energy analyst with Again Capital. Thanks for your insights.
KILDUFF: Thank you, Steve. Good to be with you.
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