Washington: The Biden administration will buy three million barrels in its first bid to refill the country’s heavily-drawn oil reserve, the Department of Energy said in a statement on Monday.
“The “DoE …will purchase up to 3 million barrels of oil for the Strategic Petroleum Reserve (SPR) in continuation of the Biden-Harris Administration’s three-part replenishment plan,” the statement said, adding that the department “intends to purchase more oil later this year”.
Since last week, news wires have used sources within the DoE or the administration to report about the government’s attempts to refill the SPR.
The Biden administration has leaned heavily on the SPR since late 2021 to offset tight crude supplies that had raised fuel costs for Americans. As of last week, the SPR’s crude balance was at its lowest since November 1983 after the release of about 200 million barrels or more from the reserve over the past 18 months.
The administration’s use of the SPR has been a highly-charged matter for oil bulls and opponents of President Joe Biden. Both sides accuse him of indiscriminately releasing hundreds of millions of barrels from the stockpile to subdue crude prices and shore up his political standing with American voters — when the reserve is meant for emergency use, in times of critically short oil supply.
In his defense, Biden said he was acting to reduce record-high fuel pump prices, which stood at above $5 per gallon last June and now hover at around $3.50. The administration also blames the previous year’s high crude prices for US inflation getting to four-decade highs of above nine per cent in June.
The DoE statement on Monday reinforced the president’s argument, saying that analysis by the Treasury Department indicated that last year’s SPR releases, along with coordinated releases of oil reserves by international partners of the United States, succeeded in reducing pump prices of US gasoline “by up to roughly 40 cents per gallon compared to what they would have been absent these drawdowns”.
It added that the three-part replenishment strategy involved direct purchases with revenues from emergency sales; exchange returns that include a premium to volume delivered; and securing of legislative solutions that avoid unnecessary sales unrelated to supply disruptions so as to strategically maintain volume.
It said the DoE has also secured the cancellation of 140 million barrels in congressionally mandated sales scheduled for fiscal years 2024 through 2027.
“This cancellation has already led to significant progress toward replenishment and will allow the SPR to have the same number of barrels in reserve by the end of FY 2027 that it would have had emergency barrels not been sold in 2022,” the statement said.
London-traded Brent crude, the global benchmark for oil, settled up $1.06, or 1.4%, at $75.23 per barrel. Brent dropped by 14 per cent over the previous four weeks.
New York-traded West Texas Intermediate, or WTI, crude settled up $1.07, or 1.5%, at $71.11 per barrel. WTI had fallen by 15 per cent over the past four weeks.
WTI jumped briefly in post-settlement trade to $71.67, reacting to reports about the DoE’s planned purchase of crude for the SPR.