The Biden administration is making good on a plan to replenish the nation’s emergency oil reserves, starting with a 3 million barrel purchase of crude.
The purchase of barrels for February delivery follows a historic 180 million barrel release of oil from the US Strategic Petroleum Reserve to tame high gasoline prices amid Russia’s invasion of Ukraine and other supply issues.
“This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security,” the Department of Energy said in a notice Friday announcing the plan.
The announcement caps a year that saw President Joe Biden make unprecedented use of the SPR to help curb soaring domestic costs of fuel. The price of oil has come down in recent months and it’s now almost 40 per cent off the highs seen in the immediate aftermath of the Russian invasion. Even so, the administration has repeatedly said it reserves the right to do more sales if needed.
US benchmark oil futures initially pared some losses on the news before eventually settling down 2.4% at $74.29 a barrel.
The Biden administration previously laid out a plan to repurchase oil for the approximately 700 million barrel-strong reserve when the price of crude hit around $70 a barrel. The SPR — the world’s largest emergency supply — was created in 1975 in the wake of the Arab oil embargo.
In addition, the DOE is planning a roughly 2 million barrel crude oil exchange to meet emergency supply needs caused by the shutdown of TC Energy Corp.’s Keystone pipeline, a senior administration official said Friday. In an exchange, an entity — often a refiner — borrows from the SPR for a brief period due to extreme circumstances and later replaces it in full, along with a premium of an additional amount of oil, according to the agency’s website.
The purchases are being made using a new rule tweak that allows the Energy Department to buy oil using fixed-price contracts. Previously, the DOE could enter into contracts for future delivery, but the price paid reflected prices at the time the product was delivered.
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