The United States Department of Energy said on Friday that it plans to buy 3 million barrels of crude oil for the Strategic Petroleum Reserve for March delivery as oil prices sink to levels below the stated threshold for the government’s refill plan.
The Biden Administration saw the stockpiles of crude oil in the nation’s strategic reserve fall from 638 billion barrels at President Joe Biden’s inauguration to just 347 billion barrels by this summer as the Administration tried to bring down gasoline prices for consumers. The large sell-off in the country’s safety supply of crude oil was met with criticism. Also met with criticism has been the Administration’s slow response to falling oil prices—a perfect opportunity for any Administration earnestly looking to replenish SPR oil inventories.
The Administration announced it would plan to refill the SPR with crude oil when prices fall below $70. It later revised that figure to $79 per barrel. Today, crude oil prices are trading at $71, and within the Administration’s desired range to begin the slow refill process. The 3 million barrels announced for March delivery amounts to just 1% of what has been depleted. The crude oil sold from the SPR was sold at about $95 per barrel.
So far, the Administration has bought back about 9 million barrels of crude after its massive sale.
Crude oil prices have been falling for weeks, with WTI seeing a $15 per barrel loss over the last two months, and Brent crude seeing a $13 per barrel loss.
Part of the reason for the slow roll in refilling the SPR has been modernization efforts at the SPR, called Life Extension 2, which was designed to improve operational integrity.
The Biden Administration must also be careful not to purchase too much too quickly—an action that could send oil prices higher again.
By Julianne Geiger for Oilprice.com
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