Following an announcement from the U.S. Department of Energy’s Office of Petroleum Reserve on Thursday that it would solicit bids for purchasing oil for the Strategic Petroleum Reserve, an energy analyst questioned the wisdom behind the move.
The DOE unit said it plans to start the purchase with solicitation for up to 6 million barrels of oil for delivery in December 2023 and January 2024. Bids for the first solicitation for December receipt are due no later than 10 a.m. CT on Oct. 24, and the deadline for the second solicitation for January receipt is 10 a.m. CT on Nov. 1, 2023. These purchases will last at least through May 2024.
The federal agency stated that the purchases would be made during months when oil prices are advantageous for taxpayers, quantified as below $79 per barrel. Currently, West Texas Intermediate (WTI) crude oil, also known as light sweet crude, trades close to $90 per barrel.
The announcement advances the “President’s commitment to safeguard and replenish this critical energy security asset, following his historic release from the SPR to address the significant global supply disruption caused by Putin’s war on Ukraine and provide a wartime bridge to keep the domestic market well supplied, which ultimately helps bring down prices for American consumers and businesses,” the DOE said.
The Biden administration sold about 180 million barrels of oil from the SPR in 2022, inviting sharp criticism from the Republicans for depleting the SPR with an eye on election gains. The federally-owned SPR is the world’s largest supply of emergency crude oil and is stored in underground salt caverns at four sites in Texas and Louisiana.
The DOE also noted that it has already bought 4.8 million barrels of crude oil for SPR replenishment at an average price of below $73 a barrel. This, the agency said, was far lower than the average price of $95 a barrel at which the SPR crude was sold in 2022.
Noted energy analyst Anas Alhajji weighed in on the development and said in a post on X, formerly Twitter, “I am trying to find the wisdom of soliciting bids to purchase oil for the #SPR that will not materialize… time after time.”
While noting that the market for medium sour crude is tight, the analyst asked, “What is the wisdom behind the #Biden Administration acting as a buyer of medium sour crude?”
Produced in association with Benzinga