"This" Shortage Pressures Trump's "TACO" [Weekend Money]

U.S. Strategic Petroleum Reserves Fall to Lowest Level Since 1983

Trump Faces Urgent Need for Exit Strategy

As the Iran crisis drags on, U.S. Strategic Petroleum Reserve (SPR) levels have fallen to their lowest point since 1983. This has prompted speculation that U.S. President Donald Trump’s so-called “TACO” could make a return.

Park Sanghyun, a researcher at iM Securities, recently discussed this in his report “Sharp Decline in Crude Oil Inventories Pressures TACO.” TACO is an acronym for “Trump Always Chickens Out”, referring to Trump’s tendency to retreat after announcing policy moves that end up roiling the markets.

According to Park, while there are reports that a deal between the U.S. and Iran is imminent, the outcome remains uncertain. He drew attention to the fact that the U.S. Strategic Petroleum Reserve has dropped to its lowest level since 1983. Current reserves stand at 298.7 million barrels, the lowest since January 1983, and more than 100 million barrels below levels seen before the verge of the U.S.-Iran conflict in late February.

He noted that as the conflict becomes protracted, there is a possibility the SPR could drop further. He also pointed out that, due to the deteriorated state of infrastructure, 130 million barrels of the SPR are now unusable, representing a further risk stoking uncertainty in oil markets. In addition, commercial crude oil inventories are also falling sharply. Park warned, “If the Iran crisis drags on and U.S. crude reserves decline further, the risk of significant oil price hikes could materialize,” adding, “Even if the Iran issue is eventually resolved, the subsequent need for the U.S. and other countries to rebuild their crude oil reserves could greatly limit any fall in oil prices, making inventory levels a wild card for the market.”

Park also commented that, as the Iran crisis is prolonged, President Trump’s position is weakening and an exit strategy has become crucial for him to quickly disengage from the standoff. If military tensions flare up again and oil prices rise further, inflationary pressure will intensify, and the U.S. Federal Reserve (Fed) is watching this closely, even signaling a possible rate hike. With the risk of U.S. Treasury yields rising further leading to funding tightness domestically, escalating risks associated with Iran could deal a major blow to U.S. financial markets and the broader economy through higher Treasury rates.

Park underscored that President Trump’s rapidly declining approval ratings are also increasing pressure on his TACO with respect to Iran. “Domestic conditions in the U.S. are mounting pressure on President Trump to enter negotiations with Iran,” he said. “Although it is uncertain what form a deal would take, the chances of the U.S. and Iran striking an agreement—possibly involving the lifting of the blockade of the Strait of Hormuz—appear to be increasing.”

This content was produced with the assistance of AI translation services.