US budget deficit hits staggering $1.1tln, Biden hopes to refill SPR

By Al Mayadeen English
Source: Agencies
12 Apr 2023 23:39
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Washington aims to fill the SPR at prices between $67-72, but when the mark was hit, OPEC+ announced a shocking further oil production cut, hiking barrel prices by $5.

A 3D printed oil pump jack placed on dollar banknotes in this illustration picture, April 14, 2020 (Reuters)

The US budget deficit rose by a staggering 65% during just the first six months of the new fiscal year, recording a $1.1 trillion gap up from $668 billion from last year during the same period, the Treasury Department stated on Wednesday.

While revenue inflow dropped by three percent in the mentioned period, spending hiked by 13 percent, the Department noted.

Among the reasons attributed to the inclined expenditure was the historic defense budget of $857.9 billion in the fiscal year 2023 - $135 billion more than that of 2022. The banking crash crisis "associated with Silicon Valley Bank and Signature Bank" also contributed to widening the deficit after it required a $29 billion bailout by the Federal Deposit Insurance Corporation's deposit insurance fund program.

Higher Medicare and Medicaid costs were also among the reasons, the statement said.

On the other hand, a decline in income tax returns was one of the main reasons for the three percent revenue drop.

SPR vs. OPEC+

Washington plans on replenishing the US Strategic Petroleum Reserve (SPR) soon but hopes that it can do so with lower oil prices during this year if it is "advantageous to taxpayers," US Energy Secretary Jennifer Granholm stated on Wednesday, according to Reuters.

As Washington tried to control the nation's gas prices in 2022, and then responding to the OPEC+ decision to cut global production, US President Joe Biden released since last year over 200 million barrels of oil from America's strategic reserves - a historic amount that led to the depletion of the SPR into a four-decade low last witnessed in November 1983.

Biden's administration planned on refilling the reserves when oil prices were between $67-$72 a barrel, which was reached back in March, but as soon as the mark hit the desired price, OPEC+ announced a surprise further production cut, sending prices $5 higher per barrel.

"We cannot sell and take in (crude oil) at the same time," Granholm said, adding that the reserves are being sold from two of the four storage sites in the US, following Congressional decisions to sell 26 million barrels in the fiscal year 2023.

The current oil stock is at 369.6 million barrels, almost 43 percent lower than it was at the beginning of 2021 at 638 million barrels.

IRA heat

Western unprecedented sanctions that targeted Russia and its energy exports last year after the start of the war in Ukraine intensely impacted the global energy market and released a rippling effect that left most of the West suffering from an energy crisis. The crisis pushed some of the EU member states to go back to burning coal for energy or reviving power plants fueled by oil.

Granholm confirmed during an energy conference in New York that the shift toward fossil fuels was temporary and came at a time when governments were taking steps to replace dirty energy with clean renewable energy.

The energy secretary said the Inflation Reduction Act (IRA) introduced by Biden's administration aims to push domestic production of clean energy as Washington aims to bring down reliance on other countries for processing critical minerals for technologies such as electric vehicles (EV), on top of which is China.

The IRA, which was signed into law by US President Joe Biden in August 2022, commits $300 billion to deficit reduction, as well as approximately $390 billion in funding for energy security, including tax credits for US-made electric vehicles and consumer subsidies, and $80 billion to increase Internal Revenue Service tax enforcement and operations.

Introducing policy reforms is crucial to promote the use of clean energy and putting it on a fast track, Granholm said, noting that Biden is considering using his presidential authorities and Congress to push for further reforms targeting the energy sector.

The administration is holding close talks with governmental agencies to establish firm deadlines regarding passing new permits, she concluded.