Crude oil sold by US SPR
The United States Department of Energy (DOE) announced on October 18, 2022 a notice of sale of up to 15 million barrels of crude oil from the United States Strategic Petroleum Reserve (SPR), to help meet the market supply disruption caused by the full-scale invasion of Ukraine and to help reduce energy costs.
The sale took place on October 19, 2022, for delivery in December 2022. This sale will complement the sale of 180 million barrels of SPR crude oil announced by President Biden in the spring of 2022 and is part of a larger effort wide to ensure an adequate supply. oil supply in response to Russia’s large-scale invasion of Ukraine.
The SPR was created in the 1970s to reduce the effects of unexpected reductions in oil supply. The reserve was designed to hold up to 714 million barrels of crude oil at four storage sites along the Gulf of Mexico, where much of the United States’ oil refining capacity is located. One of the primary missions of the SPR is to hold enough oil stocks to meet U.S. obligations under the International Energy Program, the 1974 treaty that created the International Energy Agency (IEA). . The U.S. Energy Information Administration (EIA) surveys SPR inventory levels weekly in its ‘Weekly oil status report‘. As of October 14, 2022, the SPR held 405 million barrels of crude oil, the lowest inventory level the SPR has held since June 1984. SPR crude oil inventories have declined in recent years, largely to because of the levies authorized by law in the bills passed in previous years. .
On Oct. 18, the DOE finalized a rule outlining how it plans to reconstitute the SPR. The rule allows fixed-price crude oil purchases when the price of West Texas Intermediate (WTI) crude oil is at or below approximately US$67 to US$72/bbl.
Crude oil can be released from the SPR under four conditions: emergency drawdowns, test sales, swap agreements and non-emergency sales. This announced sale is part of the emergency levy announced earlier this year. Prior to 2022, the most recent fire sale was in 2011, when bbl responded to disruptions in Libya.
Test sales are relatively rare: the most recent test sale was in 2014. In contrast, the SPR has released crude oil under swap agreements 13 times since 1996, most recently after Hurricane Ida in September 2021. In these swap agreements, crude oil is released to private companies and repaid in kind on specified dates with additional barrels, similar to monetary interest on a loan.
Congress has also authorized non-emergency sales of SPR crude oil to respond to smaller supply disruptions or to augment US Treasury revenue. For example, Fixing America’s Surface Transportation Act, passed in 2015, and the Bipartisan Budget Act of 2018 collectively call for the sale of more than 160 million barrels of SPR crude oil in fiscal years 2022 through 2027.
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