The Biden administration announced on Friday that it will purchase an additional 6 million barrels of oil for the national oil reserve as prices have fallen, with the government aiming to replenish depleted stocks.
The U.S. Department of Energy (DOE) has stated that it is ready to accept two new bids, one for 1.5 million barrels to be delivered in September, and the other for 4.5 million barrels to be delivered in October, November, and December, in order to replenish the Strategic Petroleum Reserve (SPR) which has reached historically low levels in recent years.
Deliveries will take place at the Bayou Choctaw storage site, located approximately 12 miles southwest of Baton Rouge, Louisiana.
In a statement, the agency noted that “the action is part of the DOE’s strategy to stabilize bidding when oil prices are favorable to taxpayers” and added that their goal is to purchase at prices of $79 per barrel or lower.
In 2022, the Biden administration announced the sale of 180 million barrels of oil from the reserve within six months in an effort to reduce gasoline prices. The average price of the SPR sale at that time was around $95 per barrel. The U.S. Treasury estimated that the sale of 180 million barrels lowered natural gas prices by 40 cents per gallon.
The record-setting SPR sale in 2022 sparked mixed reactions, with some praising it as a bold move to combat rising inflation, while others, mainly Republicans, accused President Joe Biden of tapping into the strategic reserve for political gain ahead of the 2022 midterm elections rather than due to an emergency.
Subsequently, in October 2022, Biden announced a plan to replenish depleted stocks over the coming years, aiming to replenish oil reserves when U.S. crude prices are around $70 per barrel. Uncertainty in oil supply following Russia’s invasion of Ukraine in February 2022 drove crude oil prices up to around $120 per barrel.
As of the time of the report, U.S. crude oil prices were around $75 per barrel, while international benchmark Brent crude prices were around $79 per barrel.
The Department of Energy stated in a release that it will continue to evaluate options to replenish the SPR, taking into account program cost-effectiveness and market developments to ensure a good deal for taxpayers.
In 2009, SPR inventories reached a historic high of a total of 726.6 million barrels. According to the U.S. Energy Information Administration, the announced sales commitments in 2022 extended into the following year, leading to the SPR reaching its decades-low of 347.2 million barrels in June 2023. At the beginning of 2022, the reserves stood at around 588 million barrels.
The federal government’s oil reserves are stored in underground salt caverns in Texas and Louisiana at four locations.
Due to concerns over the depletion of the SPR, a bipartisan proposal was introduced in March by the Senate seeking to strengthen the ban on selling reserve oil to China and other hostile foreign nations.
When Biden’s historic 2022 sales were announced, selling to Chinese companies raised heated debates, including the sale of 1 million barrels to UNIPEC America, a subsidiary of China Petroleum in Houston.
A U.S. financing bill signed by Biden in March 2024 prohibits Chinese companies from purchasing oil from the inventory, with an exception that China can buy if the crude oil is not exported.
Republican Senator Joni Ernst of Iowa and Democratic Senator John Fetterman of Pennsylvania introduced a bill aiming to prohibit selling SPR to China, Russia, Iran, Venezuela, Syria, and Cuba. It also aims to prohibit such sales to any entity owned, controlled, or influenced by the Chinese Communist Party (CCP).
Ernst stated, “Energy security is national security, so we must protect our strategic oil supplies from falling into the wrong hands.”
“This bipartisan bill will ensure that America’s strategic oil reserves do not fall into the hands of those seeking to harm us and ensures that CCP-controlled companies do not profit from subsidized oil stored at the taxpayer’s expense. We cannot leave Americans behind when our adversaries are seeking any advantage against us,” she said.
Fetterman emphasized the need to prioritize national security when considering the sale of SPR.
“Our strategic petroleum reserve is designed to protect America and our allies’ energy security,” Fetterman stated in a release.
“Our adversaries should not be allowed to purchase oil from our strategic reserves — that’s common sense. We must prioritize our national security. This is a good bill that has received overwhelming bipartisan support in both chambers.”
The bill is named the “Ban on Exporting Oil to Foreign Adversaries Act,” was introduced in the Senate on March 21, read twice, and referred to the Committee on Energy and Natural Resources for consideration.