Oil Purchases Prove to be a Challenge in 2023
- 24-Mar-2023 11:06 AM
- Journalist: Robert Hume
US: US Energy Secretary Jennifer Granholm revealed today that the US is unlikely to take advantage of the recent drop in oil prices to fill up the Strategic Petroleum Reserve (SPR) this year. President Joe Biden had previously announced plans to buy crude whenever spot prices were below $72/bl.
The SPR and maintenance at two storage facilities has made it hard to start executing the plan.
In the market scenario prices dropped to a 15-month low of $66.61 per barrel (bbl) on March 17th, and the price is now around $70/bbl. While this is far below President Biden's target price, administration officials have indicated that two Strategic Petroleum Reserve (SPR) facilities- Bayou Choctaw in Louisiana and Bryan Mound in Texas- are down for maintenance, as well as a congressionally mandated sale of 26 million bbls scheduled for delivery from April 1st to June 30th. These developments present a significant challenge towards reaching the president's goals this year.
The Strategic Petroleum Reserve (SPR) currently holds a mere 371.6 million barrels of oil - the lowest amount in nearly four decades - across four storage sites in Texas and Louisiana. To address this, the Biden administration is using the remaining $4.5 billion from the emergency sale of 180 million barrels of crude oil last year to purchase more crude. Most of the sale revenue went towards a deal which cancelled earlier congressional mandates to sell 140 million barrels of crude by fiscal year 2027.
The Biden administration believes that its intended purchase price of $67-72 per barrel will be beneficial to taxpayers as they earned an average of $95 per barrel for last year’s emergency crude sales. Additionally, these purchases promise to provide support for domestic producers, according to administration officials.
The Strategic Petroleum Reserve (SPR) could start partially refilling this summer, even if no crude purchases take place. ExxonMobil is due to return more than 3 million barrels of crude it borrowed earlier this year after Hurricane Ida.
Energy Secretary Jennifer Granholm has stated that the administration hopes to refill the SPR back up to its original level within a few years, which would mean 40 million barrels added after accounting for the 140 million barrels of cancelled oil sales. A Department of Energy official recently stated that the government wants to start purchasing within the next year.
