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The budget deal that the U.S. Congress reached on Wednesday includes the sale of 100 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) between 2022 and 2027—a total volume equal to some 15 percent of the current reserve.
According to the text of the budget deal, carried by Reuters, the agreement—expected to be voted later on Thursday—involves the Department of Energy selling 30 million barrels of the SPR between 2022 and 2025, another 35 million barrels in 2026, and additional 35 million barrels in 2027 to help fund the government.
The budget deal also involves the sale of $350 million worth of crude oil, or some 5.7 million barrels, this year, with proceeds to be used to repair storage units at the reserve.
Currently, the SPR has around 665.1 million barrels of crude oil stored in underground caverns on the coasts of Texas and Louisiana.
Last year, in the draft budget for fiscal 2018, the Trump Administration proposed selling half of the Strategic Petroleum Reserve, hoping to raise some US$500 million during the fiscal year and US$16.6 billion over the next ten years.
The proposal, however, did not become law because of opposition from Republicans in Congress. Some Republican Senators have argued that selling half the SPR would have hurt U.S. oil producers as it would have reduced oil prices. Opponents also said that the SPR was necessary in case of major storms or major unplanned outages in other oil-producing countries. Another argument of lawmakers who opposed the plan to halve the SPR was that some of the crude oil in the emergency reserve was bought at higher oil prices, so oil from the SPR should be sold when prices increase more.
In the wake of Hurricane Harvey last August, the U.S. tapped the SPR after the storm disrupted the petroleum industry in Texas and Louisiana, and led to motor fuel price spikes and shortages. A total of 5 million barrels of oil from the SPR was delivered to Gulf Coast refineries, helping to continue their processing operations and prevent further supply disruptions.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.