In response to the highest oil prices in seven years, the Biden administration has taken a decisive action to address lack of supply and lower prices for Americans at the pump by making available 50 million barrels of crude oil from the US Department of Energy’s (DOE) Strategic Petroleum Reserve (SPR).
US President Joe Biden told US Secretary of Energy Jennifer Granholm on November 23 to authorize the release of the crude.
As the global economy recovers from the pandemic, oil supply has failed to increase at a pace necessary to meet demand, the DOE said in a press release. The decision on November 23 is in response to the highest oil prices experienced in seven years and aims to ensure adequate supply as we exit the pandemic.
The announcement was made is in parallel with other major energy consuming nations including China, India, Japan, South Korea, and the United Kingdom.
“As we come out of an unprecedented global economic shutdown, oil supply has not kept up with demand, forcing working families and businesses to pay the price,” Granholm said. “This action underscores the President’s commitment to using the tools available to bring down costs for working families and to continue our economic recovery.”
According to the DOE, the exchange will be conducted with crude oil from all four SPR storage sites: approximately 10 million barrels from Big Hill, TX; approximately 10 million barrels from Bryan Mound, TX; approximately 7 million barrels from West Hackberry, LA; approximately 5 million barrels from Bayou Choctaw, LA.
Companies interested in receiving crude oil through the exchange must submit bids no later than 10:00 a.m. Central Time, December 6, 2021, and contracts will be awarded to successful offerors no later than December 14, 2021, the DOE said, adding that deliveries will take place January through April 2022, with early deliveries accepted in late December.
Exchange crude oil will be returned to the SPR in calendar years 2022, 2023, and 2024. A Notice of Sale for up to 18 million barrels of SPR crude oil will be announced no sooner than December 17, 2021.
The SPR is the world’s largest supply of emergency crude oil, and the federally owned oil stocks are stored in underground salt caverns at four storage sites in Texas and Louisiana. It is a critical tool that has a long history of protecting the economy and American livelihoods in times of economic challenge.
In response to the announcement on November 23, the DOE will make available up to 32 million barrels of SPR crude oil available through an exchange and accelerate the timeline for a sale of an additional 18 million barrels mandated by Congress in Section 30204 of the Bipartisan Budget Act of 2018 (Public Law 115-123).
An exchange is a mechanism specifically suited to the current economic environment, where markets expect future oil prices to be lower than they are today, the DOE said. The exchange creates a bridge from today’s high price environment to a period of lower prices, and automatically provides for restocking the SPR over time. Companies that receive SPR crude oil through the exchange agree to return the amount of crude oil received, as well as an additional amount that depends on how long they hold the oil.
Any company registered in the SPR’s Crude Oil Sales Offer Program is eligible to participate in the exchange and/or the upcoming Congressionally mandated sale, the DOE said, adding that other interested companies may register through the SPR website’s Crude Oil Sales Offer Program.