US secretary of energy Jennifer M Granholm has authorised that 50 million barrels of crude oil from the US Department of Energy (DOE)’s Strategic Petroleum Reserve (SPR) be made available.
As the global economy recovers from the pandemic, oil supply has failed to increase at a pace necessary to meet demand. This decision is in response to the highest oil prices experienced in 7 years and aims to ensure adequate supply as we exit the pandemic. For the first time, as the result of the president’s leadership, this announcement is in parallel with other major energy consuming nations including China, India, Japan, South Korea and the UK.
“As we come out of an unprecedented global economic shutdown, oil supply has not kept up with demand, forcing working families and businesses to pay the price,” said secretary Granholm. “This action underscores the president’s commitment to using the tools available to bring down costs for working families and to continue our economic recovery.”
The exchange will be conducted with crude oil from all four SPR storage sites (maximum amount from each site listed):
- Approximately 10 million barrels from Big Hill, Texas.
- Approximately 10 million barrels from Bryan Mound, Texas.
- Approximately 7 million barrels from West Hackberry, Louisiana.
- Approximately 5 million barrels from Bayou Choctaw, Louisiana.
Deliveries will take place from January to April 2022, with early deliveries accepted in late December 2021.
Exchange crude oil will be returned to the SPR in calendar years 2022, 2023 and 2024. A Notice of Sale for up to 18 million barrels of SPR crude oil will be announced no sooner than December 17 2021.
The SPR is one of the world’s largest supplies of emergency crude oil, and the federally owned oil stocks are stored in underground salt caverns at four storage sites in Texas and Louisiana. It is a critical tool that has a long history of protecting the economy and American livelihoods in times of economic challenge.
In response to this announcement, the DOE will make available up to 32 million barrels of SPR crude oil through an exchange and accelerate the timeline for a sale of an additional 18 million barrels mandated by Congress in Section 30204 of the Bipartisan Budget Act of 2018 (Public Law 115-123).
An exchange is a mechanism specifically suited to the current economic environment, where markets expect future oil prices to be lower than they are currently. The exchange creates a bridge from the current high price environment to a period of lower prices, and automatically provides for restocking the SPR over time. Companies that receive SPR crude oil through the exchange agree to return the amount of crude oil received, as well as an additional amount that depends on how long they hold the oil.
For more information visit www.energy.gov