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The Department of Energy has issued an invitation for bids for some 3 million barrels of crude that will go into the strategic petroleum reserve as part of refill efforts.
In the announcement, the DoE twice noted that it had sold oil from the SPR at much higher prices than it is buying it now back at, with the difference standing at $95 per barrel for the sold oil and $79 and less for the barrels that have been bought for the refill since then.
“DOE has already purchased 4.8 million barrels for SPR replenishment for an average of less than $73 per barrel – far lower than the average of about $95 per barrel that SPR crude was sold for in 2022,” the announcement said.
Last year, to arrest an inexorable climb in retail fuel prices, the White House announced a release of 180 million barrels of crude oil from the strategic petroleum reserve. Critics warned the move would have a limited effect on prices but compromise the energy security of the country by reducing the level of crude in the SPR.
The release, alongside other factors such as low demand and fears of demand destruction, did help to bring both fuel and oil prices down. In late 2022, the administration said it was going to start buying crude to replenish the SPR when prices fall to around $70 per barrel.
This year, the White House kept oscillating between caution and a willingness to finally start refilling the SPR, amid pressure from Congress Republicans to maintain an adequate strategic reserve of oil.
Eventually, this led to the offer for the purchase of 6 million barrels of oil, which was made in early July, when oil prices were within the desired range of $67 to $72 per barrel.
The offer, however, was for sour crude, which has seen substantially tightened supply due to Russia sanctions and Saudi production cuts, and this has led to an even more marked increase in prices.
The latest announcement does not mention the sort of oil that the DoE wants to buy but it will be a while yet before the SPR is replenished, according to Energy Secretary Jennifer Granholm. Earlier this year, Granholm said “The bottom line is we are going to replenish. The first term’s over in a year and a half. So, I’m not sure it’ll be fully replenished. But certainly, the plan is this term and the next term to be able to do that.”
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.