Running on Empty: The Ripple Effects of a Shrinking Oil Reserve

You have a great resume, 35th Director of the United States Mint, President of U.S. Money Reserve, but let's start with talking about you being on Lloyd Benson's staff and being directly affected by oil and having some situations with oil so you know this situation firsthand.

Well, I'm a native Texan, so I have a certain octane level in my bloodstream.

I have been around oil and gas issues since early in my career when I worked in the state comptroller's office doing fiscal policy research and revenue estimates on taxes on oil and gas.

And then I was Senator Lloyd Benson from Texas, his legislative director, and I was his energy policy analyst during some major revisions in oil and gas policy back in the 1990s.

So I followed the industry closely.

Of course, oil and gas are the lifeblood of modern economies, right? They are really literally the fuel that those economies run on.

And the history of our nation's dependence and Western European dependence on oil really dates back for 120 years and it's become increasingly important.

And our reliance upon Middle Eastern oil has been a steady theme of American politics, certainly since the 1970s, the oil embargoes and such.

And one of the great achievements over the last 20 years is the ability of the United States to establish energy independence from the Middle East.

The rest of the world, however, continues to be highly dependent on oil and gas, liquid petroleum gas coming out of the Middle East and coming through the Straits of Hormuz.

And one of the unfortunate consequences of this war, which was expected to be over in a matter of a few weeks, now dragging on for six months, is that the Strait of Hormuz has been essentially closed.

It has remained closed during much of the war.

There have been short periods where some oil and gas has trickled out.

But that has posed an enormous problem on the Western nations and many of the Eastern nations as well.

So as a result of that, there was a decision made by the Western nations to release a tremendous amount of oil from their strategic reserves, the reserves that nations hold to protect themselves in times of emergencies.

And the biggest contributor to this release from our reserves was the United States.

And we agreed to release 172 million barrels of oil over the course of the war.

I don't think we ever expected to have to draw on all that, but here we are now probably about 50 million barrels or less from hitting that 172 million barrels.

And we've just crossed under a threshold that the Department of Energy and many consultants have warned us about for years, 300 million barrels, below which we begin to take risks with really the integrity of the reserves and the equipment that that supports it.

Under $300 million for the first time since 1983, and back then it just started in 1975, so Brad Chastain, the oil reserve was still gaining in 1983.

It was hard to get very high at the time.

How does this affect the economy in more ways than just the price of gas?

The risk ultimately with getting too low and then not being able to draw more out is not being able to influence global oil prices.

And oil is one of the key inputs into literally everything.

I mean, energy is critical for driving the economy.