US to purchase more oil to replenish the Strategic Petroleum Reserve (SPR).
DOE Announces Repurchase of Oil for the Strategic Petroleum Reserve, Department of Energy, DOE.
The U.S. Department of Energy’s (DOE) Office of Petroleum Reserves, December 16 announced that it will start repurchasing crude oil for the Strategic Petroleum Reserve (SPR). This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security.
President Joe Biden announced a plan to replenish the SPR using updated authorities allowing for fixed-price purchases of crude oil. The only thing I wonder about is whether the oil companies be forced to maintain such base prices when they sell gasoline publicly. There was a lot of rent0taking in gasoline pricing over the last two years even with the release of oil from the SPR. Granted much of this may have been sweet oil which the US refining capability is in sour oil. hopefully there are safeguards in place.
Rather than the usual conventional purchase contracts exposing producers to volatile crude prices, the new approach at scale, gives producers an assurance of making investments today, the price they receive when they sell to the SPR will be locked. The starting purchase will be three million barrels of crude oil.
The replenishment strategy follows the historic releases as ordered by President Biden from the SPR to balance the global supply disruption and price surge caused by Putin’s war on Ukraine. The release from the SPR provides a wartime bridge for domestic production to increase.
Few events underscored the need for a strategic oil reserve the1973-74 oil embargo. I remember it well. I had a 65 Datsun which got 30 mpg which I needed to go back and forth to college. Once, out of Chicago, there were no gasoline lines.
President Ford set the SPR plan into motion by signing the Energy Policy and Conservation Act (EPCA) on December 22, 1975. The legislation declared it to be U.S. policy to establish a reserve of up to one billion barrels of petroleum. The Gulf of Mexico was a logical choice for oil storage sites. Approximately, 500 salt domes, known to be an inexpensive and secure means of petroleum storage, were concentrated along the coast. A plus was being near the oil refineries.