The Biden administration is making good on a plan to replenish the nation’s emergency oil reserves, starting with a 3-million-barrel purchase of crude.
The purchase of barrels for February delivery follows a historic 180-million-barrel release of oil from the US Strategic Petroleum Reserve to tame high gasoline prices amid Russia’s invasion of Ukraine and other supply issues.
“This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security,” the Energy Department said in a notice Friday announcing the plan.
US benchmark oil futures pared losses on the news, trading around $75 a barrel Friday afternoon.
The Biden administration previously laid out a plan to repurchase oil for the approximately 700 million barrel-strong reserve when the price of crude hit around $70 a barrel.
In addition, the DOE is planning a roughly 2-million-barrel crude oil exchange to meet emergency supply needs caused by the shutdown of TC Energy Corp.’s Keystone pipeline, a senior administration official said Friday. In an exchange, an entity — often a refiner — borrows from the SPR for a brief period due to extreme circumstances and later replaces it in full, along with a premium of an additional amount of oil, according to the agency’s website.
The purchases are being made using a new rule tweak that allows the Energy Department to buy oil using fixed-price contracts. Previously, the DOE could enter into contracts for future delivery, but the price paid reflected prices at the time the product was delivered.