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(Bloomberg) – The U.S. purchased 2.8 MMbbl of crude for the nation’s emergency oil cache as it seeks to replenish depleted supplies.
The Energy Department has been slowly refilling the Strategic Petroleum Reserve after it reached a 40-year-low following the Biden administration’s unprecedented drawdown in the wake of Russia’s invasion of Ukraine.
In 2022, the Biden administration ordered the release of a record 180 MMbbl from the emergency oil supply in the face of surging retail gasoline costs. Now, even as pump prices are back on the rise, the DOE has committed to refilling the cache, with the enormous storage caverns still sitting about half empty.
The announcement Thursday brings the total amount of oil the U.S. has purchased for the inventories since last year to 32.3 MMbbl. The Energy Department has paid an average price of under $77 per bbl, below the average price of $95 it sold for in 2022, the agency said in a statement.
The Energy Department “will continue to evaluate market conditions and competitive bids to ensure our SPR continues to meet its mission when called upon,” the agency said.
The Energy Department said it spent nearly $226 million on the purchase — that would imply an average price of about $81 per bbl, in excess of a previously stated target of purchasing oil at $79 or lower to refill the reserve.
The crude oil will be delivered to the reserve’s Big Hill storage site in Texas from Sept. 1 through Sept. 30, the Energy Department said. A U.S. unit of Macquarie was awarded a contract for nearly 1.2 MMbbl, while Sunoco Partners Marketing & Terminals LP and Atlantic Trading & Marketing Inc., were awarded contracts for nearly 793,000 bbl each, according to the department.
In addition to repurchasing oil, the department’s strategy to refill the system has included the acceleration of the return of loaned oil to the reserve and the cancellation of some 140 million barrels of reserve sales that had been mandated by Congress.
“We announced a replenishment strategy aimed at delivering a good deal for American taxpayers and maintaining the readiness of the world’s largest Strategic Petroleum Reserve — and that strategy is working,” Energy Secretary Jennifer Granholm said in a statement. “We will to continue to monitor market conditions as we remain nimble and innovative in our successful replenishment approach to protect this critical national security asset.”
The Energy Department is also seeking some 3 MMbbl for a Strategic Petroleum Reserve site that had been down for maintenance — the Bayou Choctaw site in Louisiana — starting with 1.5 MMbbl in August, and an additional 1.5 MMbbl in September. “Pending competitive bids and market dynamics, DOE will aim to solicit and fully subscribe available capacity as it is available,” the department said in a statement Thursday.
The Energy Department plans to have conversations with Congress about canceling additional mandated oil sales and is expecting the return of additional loaned barrels this year, according to a person familiar with the matter who asked not to be named because the information is private.
The Strategic Petroleum Reserve currently holds about 363 MMbbl, according to Energy Department data. The reserve held nearly 600 MMbbl at the start of 2022.
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