On Monday, the Biden Administration announced that it will be selling 26 million barrels of oil from the Strategic Petroleum Reserve (SPR) between April 1st and June 30th. This sale is required by the Bipartisan Budget Act of 2015 and the Fixing America’s Surface Transportation (FAST) Act, and is aimed at providing short-term relief for gas prices as the United States nears the summer driving season.
The SPR currently contains 371.6 million barrels -- a historic low since December 1983, according to the Energy Information Administration (EIA). After this sale, the SPR inventory will be at about 346 million barrels, the lowest level since August 1983.
Phil Flynn, analyst Price Futures Group and FOX Business Network contributor, said, “By pushing barrels forward from previously announced sales he is robbing Peter to pay Paul but is discouraging future U.S. oil and gas investment. There should be some backlash from Republicans who are getting tired of using the SPR for political purposes and creating short-term price relief in exchange for much higher prices down the road.”
The announcement has also caused some debate in Congress, as lawmakers have used SPR sales as a means to finance spending proposals, and have recently passed a pair of bills that put conditions on future sales from the SPR, including prohibiting sales to the Chinese government or companies it controls. The Republican House also passed a bill that requires the development of a plan to make more federal lands available for oil and gas leasing prior to a non-emergency drawdown of the SPR.
The Dept. of Energy (DOE) is looking to replenish the SPR over the long term through direct repurchases with revenues obtained through emergency sales, exchange returns that include a premium to volume delivered, and legislative solutions that avoid unnecessary sales unrelated to supply disruptions.