The U.S. Department of Energy announced the loan of 13.4 million barrels of crude oil from its strategic reserve as part of a renewed effort by the Biden administration to contain oil prices that have surged to their highest level since 2014.
The awards to seven companies – part of a previously announced move – mark the second-largest exchange of oil from the Strategic Petroleum Reserve ever and bring the total amount of oil released from the cache to nearly 40 million barrels, according to the Energy Department.
The awards are a part of a plan announced in November by President Joe Biden to release 50 million barrels from the SPR in a move coordinated with India, Japan, South Korea and China that marked an unprecedented effort to reduce prices and ease OPEC’s stranglehold on supply.
U.S. crude prices are now higher than they were in October, when the Biden administration began touting plans to release the country’s emergency reserves. This year alone, benchmark West Texas Intermediate crude oil prices have gained more than 13 per cent as demand recovery has outpaced available supply.
Benchmark West Texas Intermediate crude rose 2.8 per cent to settle at $85.60 a barrel. The average price of U.S. regular unleaded gasoline, which has risen for 10 consecutive days, was $3.34 a gallon Monday, according to automotive club AAA.
The surge in fuel costs threatens the U.S. economic rebound and poses political risks for Biden’s presidency and the ability of Democrats to retain control of Congress in elections later this year. Last week, Biden pledged to continue efforts to lower oil prices noting the White House was “trying to increase oil supplies that are available.”
OPEC and its allies have been falling short of meeting monthly quotas that were part of a plan to boost production. Some of its members have endured setbacks from unrest that had disrupted output including Libya, Nigeria, and Kazakhstan.
Prior to today’s award, the agency had granted over 8 million barrels of strategic reserve oil as part of the exchange program that had offered a total of 32 million. Awardees of this program are expected to return the barrels during 2022-2024. In a separate offer, the Biden Administration had sold 18.1 million barrels of SPR crude for delivery over February and March.
Awardees in the latest exchange round include Shell Trading US Co. (4.2 million barrels), Trafigura Trading LLC (3 million barrels), Phillips 66 Co. (2.3 million barrels), Macquarie Commodities Trading SA (2 million barrels), Chevron Corp. (0.885 million barrels), ExxonMobil Oil Corp. (0.515 million barrels,) and BP Products North America Inc. (0.5 million barrels).
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