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U.S. DEPARTMENT OF ENERGY ANNOUNCES LONG-TERM BUYBACK PLAN ENSURING CONTINUED AVAILABILITY OF STRATEGIC PETROLEUM RESERVE
DOE to Initiate Transparent, Competitive Process to Replenish U.S. Emergency Crude Oil Distributed to Alleviate Global Supply Disruptions Caused by Putin’s War
WASHINGTON, D.C. — The U.S. Department of Energy (DOE) today announced it is initiating a long-term replenishment plan for America’s strategic petroleum reserve (SPR) to ensure that the nation’s SPR will continue to deliver on its mission as an available resource to alleviate domestic and global crude oil supply disruptions. The buyback process will begin with a call for bids to repurchase a third of the 180 million emergency barrels released as part of a coordinated action with our international partners to provide a wartime bridge supporting American consumers and the global economy in response to Vladimir Putin’s war of choice against Ukraine. The call for bids will take place in the fall of 2022 to secure delivery in future years when prices are anticipated to be significantly lower than they are today, and will represent a first tranche of purchases to replenish the SPR, with more planned after these purchases are executed.
“The U.S. Strategic Petroleum Reserve, the largest emergency supply in the world, is a valuable tool to protect the American economy and consumers from supply disruptions— whether caused by emergencies at home or petro-dictators weaponizing access to energy resources,” said U.S. Secretary of Energy Jennifer M. Granholm. “As we are thoughtful and methodical in the decision to drawdown from our emergency reserve, we must be similarly strategic in replenishing the supply so that it stands ready to deliver on its mission to provide relief when needed most.”
The fall 2022 call for bids to purchase 60 million barrels will specify the volume and type of crude oil that SPR will purchase. The future delivery window will be based on anticipated market conditions factoring in when future oil prices and demand are expected to be significantly lower. In addition to securing contracts for future delivery to refill the SPR, this replenishment structure also will help encourage the production we need to lower prices this year by guaranteeing this demand in the future at a time when market participants anticipate crude oil prices to be significantly lower than they are today.
As part of this buyback plan, DOE intends to begin a rulemaking proceeding to consider broadening DOE’s buyback regulations to allow for a competitive, fixed-price bid process as an alternative to the index-pricing that is traditionally used.
With the steps announced today, the Biden-Harris Administration is taking an important step to be sure that the SPR can be maintained at levels that allow it to accomplish its mission and remain the world’s largest supply of emergency crude oil. The DOE will continue to work with Congress to maintain operational integrity and sufficient volume to accomplish the SPR’s mission. This includes responding to significant supply disruptions while also complying with congressionally mandated sales of as much as 265 million barrels between FY23 and FY31.
This the latest in a range of measures that the Biden Administration has taken to address Putin’s price hike and provide relief for Americans. Even before the historic authorization of 1 million barrels per day from the SPR, the President secured global cooperation on a collective release at the beginning of March right after Putin launched his further invasion of Ukraine. The Environmental Protection Agency recently announced that it is issuing an emergency fuel waiver that will allow the sale of E15 gasoline across the country this summer, in order to provide more flexibility for families to save money at the pump and build real U.S. energy independence. The President has also called on Congress to enact use-it-or-lose-it policies that would make companies pay fees on their federal leases that are non-producing as well as their idled wells on federal lands, in order to encourage more domestic production. Finally, the Administration has strengthened fuel economy standards that will make vehicles go farther on every gallon.
For more information on the SPR please visit Infographic: Strategic Petroleum Reserve and Fact Sheet: Strategic Petroleum Reserve. Sign up to receive future FECM news alerts here.
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