U.S. Department of Energy (DOE) announced on Thursday its plan to start buying oil to restock the Strategic Petroleum Reserve (SPR).
Gas prices have skyrocketed across the globe since Russia invaded Ukraine in January, influencing the Biden administration’s decision to tap reserves to help boost oil supplies.
DOE will call for bids on 60 million barrels of oil come Fall 2022. However, the department anticipates deliveries will not be fulfilled until fiscal year 2023—when future oil prices and demand are expected to be lower.
Jennifer M. Granholm, secretary of energy, made the SPR announcement, saying reserves are a valuable tool made available to the American economy and consumers to “protect” from supply disruptions.
“As we are thoughtful and methodical in the decision to drawdown from our emergency reserve, we must be similarly strategic in replenishing the supply so that it stands ready to deliver on its mission to provide relief when needed most,” she says.
Anticipate Changes
According to DOE’s announcement, it will consider broadening its buyback regulations to “allow for a competitive, fixed-price bid process.”
Traditionally, Presidential drawdowns are sold in a competitive auction to the highest bidder. Proceeds are then placed into an account that is used to purchase oil at a later date.
A Page from the History Book
In 1975, the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo on the U.S., igniting a U.S. energy crisis that evolved into a recession.
To mitigate future oil impositions, President Gerald Ford created the SPR by acquiring numerous salt caverns around the Gulf of Mexico that served as storage sites in the 70’s.
Today, the SPRs 714-million-barrel storage capacity is overseen by the Deputy Assistant Secretary of the Office of Petroleum Reserves in Washington, D.C., while daily operations are carried out by the SPR Project Management Office in New Orleans, LA.
