The Biden administration has moved to increase the pace of crude oil purchases to refill the Strategic Petroleum Reserve (SPR) following its historic drawdown in 2022. The Department of Energy (DOE) has issued two new solicitations to buy a combined 6 million barrels of crude for delivery to the Bayou Choctaw site in Louisiana from September through December.
If these new offers and previously announced purchases are fulfilled, the DOE’s purchasing rate would increase to around 4.5 million barrels per month for September, October, and November, up from about 3 million barrels currently. Energy Secretary Jennifer Granholm stated that the department could further accelerate the replenishment of the SPR this year, as all four storage sites are expected to be back online by the end of the year.
The Biden administration had previously authorized a record 180 million barrel release from the SPR in 2022 in an effort to control surging gasoline prices following Russia’s invasion of Ukraine. However, this drawdown reduced the SPR to its lowest level in 40 years.
The DOE is now looking to take advantage of the current dip in oil prices, with West Texas Intermediate crude futures trading around $75 per barrel on Friday. The department aims to buy oil for the reserve at around $79 per barrel, which is below the current market price.
According to analysts, the DOE’s increased purchasing rate of 150,000 barrels per day is equal to the demand of a medium-sized U.S. refinery. The department has also shifted to a direct purchase strategy, rather than basing the buying price on an index, which has helped it acquire 38.6 million barrels at an average of $77 per barrel so far this year.