The Department of Energy said Friday it will begin the process of purchasing oil to refill the nation’s Strategic Petroleum Reserve following a dip in prices.
Oil has been trading in the low- to mid-$70s per barrel for several weeks.
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The reserve has been depleted after President Joe Biden ordered more than 200 million barrels to be drawn down on an emergency basis to help tame high gasoline prices following Russia’s invasion of Ukraine and the resulting spike in oil prices.
The department’s “pilot” solicitation announced on Friday, which provides for the purchase of 3 million barrels, will test a new acquisition program the Biden administration introduced in October when it announced its intention to acquire oil for the reserve when prices on the West Texas Intermediate benchmark were steady in a range of $67-$72 per barrel.
By contrast, the SPR oil in need of replacing was drawn down and sold at an average price of $96 per barrel.
The DOE developed the fixed-price contract option with hopes of luring wary producers to increase capital expenditures and raise output.
The department’s Friday announcement said the strategy would “give producers the assurance to make investments today, knowing that the price they receive when they sell to the SPR will be locked in place.”
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The Biden administration has tapped the reserve liberally to bring down oil and retail fuel prices. Retail gasoline and diesel both reached new nominal record highs this year and have been a political liability for Biden.
Oil and fuel prices have fallen significantly since their peak over the summer. Average retail gasoline is at a price not seen in over a year.
