Biden is buying 3 million barrels of oil to replenish the emergency Strategic Petroleum Reserve after withdrawing 180 million barrels to try to lower gas prices
- The department said it will buy the oil for less than the $96 a barrel it sold its supply for
- Three million barrels, just 15 percent of daily US demand, is a drop in the bucket of the 180 million DOE that has depleted reserves since March
- At the same time, the department will develop 1.8 million barrels from the reserve in an emergency exchange following a shutdown of the Keystone pipeline
The Department of Energy (DOE) announced on Friday that it will buy 3 million barrels of oil to replenish stocks it has been depleting from the Strategic Petroleum Reserve to drive down gas prices.
The department said it will buy the oil for less than the $96 a barrel it sold its supply for. Three million barrels, just 15 percent of daily US demand, is a drop in the bucket of the 180 million DOE that has depleted reserves since March.
The deal is part of a fixed-price plan that allows refiners to sell oil to the SPR at a stable rate and avoid selling at the price of the volatile oil market on any given day.
At the same time, the department will tap 1.8 million barrels from the reserve in an emergency exchange after the Keystone pipeline shut down due to leaks last week. A portion of the pipeline remains closed with no set timetable for reopening.
Emergency exchanges allow oil refiners to borrow oil from the reserve for short periods of time due to supply disruptions due to weather events or pipeline failures. The 1.8 barrels in the emergency bourse need to be replenished, in contrast to the 180 million barrels released since March to depress prices.
It will likely take months or years to replenish the SPR to pre-Russian invasion levels — its supply is now at its lowest level in 38 years.
The DOE announced on Friday that it will buy 3 million barrels of oil to replenish stocks it has depleted from the Strategic Petroleum Reserve to drive down gas prices
Three million barrels, just 15 percent of daily US demand, is a drop in the bucket of the 180 million DOE that has depleted reserves since March
As of this month, the reserve contains 387 million barrels of oil but is projected to hold up to 714 million barrels.
The Biden administration announced in May a plan to accept offers to buy back about a third of the depleted supply. In October, DOE said it plans to buy the oil at $67-$72 a barrel.
Oil prices came in at $73 a barrel on Friday, down from record highs of $120 a barrel in June. Retail gas was $3.18 a barrel, but buying DOE could offset falling prices and encourage oil companies to maintain or increase production.
The SPR is the world’s largest reserve of emergency oil, stored in salt caverns in Texas and Louisiana. Created by Congress in 1975 after the Arab oil embargo, it has been used in several emergencies over the years, including the 1990-91 Iraq-Kuwait crisis, Hurricane Katrina in 2005, and the Middle East uprisings during the 2011 Arab Spring.