In an effort to rebuild supplies following large releases last year, the US Department of Energy has announced the acquisition of 3 million barrels of oil for the Strategic Petroleum Reserve (SPR). This action has geopolitical and economic ramifications and has raised questions about market stability and energy security.
The agency stated that it purchased the oil for transportation to a location in Big Spring, Texas, at a cost per barrel of $77.31, which is less than the average price per barrel of $95 that the oil sold for in 2022.
According to the announcement, nine companies submitted thirty-three bids in response to the call for proposals. Additionally, three businesses submitted competitive bids after meeting the quality and specification requirements. Delivery of the crude is scheduled for March 2024.
After sales last year, the United States has already bought roughly 14 million barrels to restock. By February, oil companies that had borrowed oil through a swap will also be returning almost 4 million barrels to the SPR.
Congress had mandated the sale of 140 million barrels from the SPR, and the Energy Department had already succeeded in getting those sales canceled. The sales were set to take place from late this year until late 2026. According to the department, the cancellation “has led to significant progress toward replenishment.”
It has become more challenging for the administration to purchase oil for the reserve as a result of Saudi Arabia and Russia’s production reductions, which has raised oil prices.
It increased the price range of approximately $68 to $72 last month, to $79 or less per barrel, at which it intends to purchase back oil.
Officials within the administration have maintained that they intended to buy cheap and sell high, a tactic that would now set a floor on the decline in oil prices and incentivize producers to maintain or even boost output.
Skeptics see a political dimension at play. Critics within the Biden administration contend that the purchase is a blatant attempt to influence domestic gasoline prices before the 2024 presidential election. They argue that by building up the SPR, the government could potentially release oil later, leading to lower prices at the pump and boosting the administration’s political standing.