The Energy Department announced Thursday it will allow struggling U.S. producers to store excess oil in the federal government’s emergency Strategic Petroleum Reserve, confirming a Washington Examiner report that the move was pending.
Allowing companies to rent space in the federal government’s emergency reserve would aid the oil industry, which is projected to run out of storage for the first time in history as it faces a historic drop in demand for its product and a global glut.
The department said it is offering a solicitation to make available 30 million barrels of the SPR’s oil storage capacity. It then intends to make an additional 47 million barrels of storage capacity available after that first round. Combined, that represents the total amount of room available in the reserve. The SPR currently holds just shy of 635 million barrels of oil, according to the Energy Information Administration, with room for 77 million more barrels to meet its authorized capacity of 713.5 million barrels of oil.
“The federal help to put more storage online is certainly welcome news for American producers,” Mike Sommers, CEO of the oil lobbying group American Petroleum Institute, said Wednesday on Fox Business.
The Energy Department’s move to permit companies to rent storage space comes after Congress, as part of its phase three pandemic relief package, chose not to fund a request from President Trump to purchase low-priced oil to store in the SPR.
Without the necessary funding, the department suspended a solicitation for buying oil from U.S. producers to fill up the reserve, although it is not giving up on that idea either.
“The Department continues to work with Congress to find ways to make funding available for DOE to buy American oil,” Energy Secretary Dan Brouillette said Thursday. “However, we must move with a sense of urgency to support an industry that underpins the U.S. economy and supports our national security. Making some of the SPR’s storage capacity available to industry, without purchasing the oil, provides this immediate benefit to the industry and its hard-working employees.”
The Energy Department’s announcement follows a slight rally in oil prices Thursday after Trump suggested Saudi Arabia and Russia had agreed to stand down on their price war that has flooded the market with oil it doesn’t need, with demand crushed because of the coronavirus pandemic.
Allowing producers to store their extra crude would not require an appropriation from Congress, a former Trump administration official told the Washington Examiner.
The official said the Energy Department briefed Capitol Hill staff on the concept earlier this week, indicating it doesn’t require new funding, only a small amount of operational funding, which is available under existing appropriations.
