Feb 15, 2023
President Biden is pulling more crude from the Strategic Petroleum Reserve (SPR) due to a budget mandate from 2015 — depleting the “oil piggy bank” further to 345 million barrels.
The Department of Energy announced on Monday it would be selling 26 million barrels of crude oil, even though it had previously considered canceling the sale.
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While the Biden administration has a three-part plan to refill the emergency reserves, they’re already down to 372 million barrels — a record low since 1983. And the coming release is expected to push stockpiles down even further.
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This year’s SPR release was mandated by Congress years ago
Legislation from 2015 established SPR sales from 2018 through 2025 to fund federal spending — which means Congress would have needed to intervene to halt this year’s sale.
The Energy Department says bids on the oil are due on Feb. 28 and that the oil will be delivered from April 1 to June 30.
This comes after last year’s withdrawal of 180 million barrels to counter supply issues created from Russia’s invasion of Ukraine.
Some experts opposed the plan to drain the SPR — which was established for emergency use during an oil supply or economic crisis — calling it a political move to reduce domestic gas prices.
While another 140 million barrels were mandated for release between the 2024 to 2027 fiscal years, Congress canceled the sale after a proposal from the Energy Department to stop it.
“This action will not only maintain volume but also ensure the best value for taxpayers at approximately $74 a barrel that avoids unnecessary releases to the market when there is not a supply disruption,” the department said in a statement.
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There’s a three-part strategy to replenish the reserve
The Biden administration has laid out its strategy to refill the SPR with revenue from emergency sales, returns from prior exchanges and legislative solutions to “avoid unnecessary sales unrelated to supply disruptions to strategically maintain volume.”
The goal was to begin buying crude when it dropped to about $70 a barrel. The repurchase plan would have begun with 3 million barrels of crude oil for delivery in February.
“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 noted in a statement.
Although U.S. benchmark prices fell close to the $70 mark in December, the Energy Department rejected the first round of offers with the objective of providing “a fair deal for taxpayers.”
“DOE will only select bids that meet the required crude specifications and that are at a price that is a good deal for taxpayers.”
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
