The United States is to start buying oil to refill its Strategic Petroleum Reserve (SPR), the largest emergency stockpile of crude oil in the world.
The SPR was established after the 1973–1974 oil embargo to help mitigate any future disruptions to the supply of crude oil. It has a capacity of 714 million barrels, but substantial volumes have been released recently in an effort to bring down oil prices and mitigate the disruption to supply caused by Russia’s invasion of Ukraine. According to the US Energy Information Administration, this has brought it to the lowest level since the mid-1980s at 382 million barrels.
To encourage US oil majors like ExxonMobil and Chevron, the owners of the Mobil and Texaco lubricant brands, to increase production, the US Administration also said it would start buying back when prices dropped to around $70 per barrel. The senior energy adviser to President Biden, Amos Hochstein, said recently in an interview:
“We can buy back at those prices. That will put a major buyer back into the market that will stabilise it. So you have no excuse not to increase production.”
With the US Department of Energy (DoE) claiming that it sold oil from the SPR at an average of $96 per barrel, refilling it at around $75 per barrel seems extremely affordable. The DoE will now pilot its change of strategy by purchasing 3 million barrels of domestically produced sour oil, with contracts being awarded in January for delivery in February.
