Oil prices are surging again, but this time Biden has way less ammunition to bring them down

• Oil prices are surging again, but the Strategic Petroleum Reserve remains near 40-year lows.
• Last year, the Biden administration drained 180 million barrels from the SPR as oil prices soared.
• Oil's latest uptick has raised fears of persistent inflation and the possibility of more Fed rate hikes.

Oil prices are surging again, but the Biden administration's biggest weapon for bringing them down has much less ammunition.

Last year, the federal government drained 180 million barrels from the Strategic Petroleum Reserve as oil prices soared in the aftermath of Russia's invasion of Ukraine and the turmoil in energy markets that followed.

Flooding the market with all that supply helped bring oil prices down — and helped cool inflation, which had shot up as well. 

Earlier this year, the administration took some steps to start refilling the SPR. But while it has ticked up slightly, the level remains near 40-year lows at about 350 million barrels. That's less than half of the all-time highs from 2010 and about 40% below where it was when the withdrawals began.

"America's SPR is the largest in the world and stands ready to deliver on its mission to respond to future supply disruptions, providing relief when needed most," a spokesperson for the Energy Department said in a statement to Insider. 

But the department didn't specifically address questions on whether the Biden administration plans fresh withdrawals and how much scope the SPR has for additional drawdowns.

Another US stockpile of oil comes from commercial inventories, which sit at 416.6 million barrels. But that source tends to be more volatile than the SPR and has dropped 21% from a year ago.

Meanwhile, Brent crude prices recently hit a 10-month high, having jumped more than 20% since late June, and US gasoline prices hit their highest summertime levels in over a decade, even as the driving season has ended.

That came as Saudi Arabia and Russia announced they would prolong their oil production cuts for another three months until December.

The stock market has started to feel the ripple effects from rising oil prices. With prices for crude and refined fuels shooting up, investors are growing more concerned that inflation could re-accelerate after more than a year of slowing down.

And that could force the Federal Reserve to keep benchmark rates higher for longer, or even raise them further.

For now, the SPR looks to be a non-factor. Last month, the Biden administration canceled plans to add 6 million barrels back in the reserve, saying the price of oil at the time didn't offer taxpayers a good deal. Prices have since continued to march higher.

And Congress nixed its earlier plans to sell 140 million barrels from the SPR over the next three years in a spending bill that was passed in December.

To be sure, the US can also pump plenty of oil. It became the world's biggest oil producer over the last two decades as the shale boom unlocked huge volumes in Texas, New Mexico, and North Dakota.

But the Energy Department recently estimated that the top US shale regions will continue pumping less oil this month, after hitting a record high in July. 

And over the longer term, the productive capacity of shale wells is looking less robust. Research firm Enverus recently said that the natural drop-off rate in a well's output is much steeper than originally thought. So oil companies must drill new wells at a faster clip just to keep output steady.