The Department of Energy (DOE) announced that it 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. DOE issued a solicitation of sour crude oil to the Big Hill SPR site.
Today’s announcement advances the President’s replenishment strategy following his historic release from the SPR to address the significant global supply disruption caused by Putin’s war on Ukraine and provide a wartime bridge for domestic production to increase. Analysis from the Department of the Treasury indicates that SPR releases last year, along with coordinated releases from international partners, reduced gasoline prices by up to roughly 40 cents per gallon compared to what they would have been absent these drawdowns.
DOE is committed to executing an SPR replenishment strategy that provides the best deal for taxpayers— aiming to repurchase crude at a lower price than the average of about $95 per barrel it was sold for in 2022, while strengthening energy security by providing certainty to the industry in a way that helps encourage near-term supply. DOE intends to purchase more oil later this year.
The three-part replenishment strategy includes: (1) Direct purchases with revenues from emergency sales; (2) Exchange returns that include a premium to volume delivered; and (3) Securing legislative solutions that avoid unnecessary sales unrelated to supply disruptions so as to strategically maintain volume. DOE has already secured 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 SPR continues to be the world’s largest supply of emergency crude oil, and the federally owned oil stocks are stored in underground salt caverns at four sites in Texas and Louisiana. Through scheduled maintenance periods and the Life Extension 2 program, DOE continues to prioritize the operational integrity of the SPR to ensure that the SPR can continue to meet its mission as a critical energy security asset. The SPR has a long history of protecting the economy and American livelihoods in times of emergency oil shortages.