House Democrats are seeking to turn the nation’s Strategic Petroleum Reserve, an emergency store of crude oil, into an investment tool that can be leveraged to make the government money when prices are high and to fund electric vehicle infrastructure.
Rep. Frank Pallone (D-NJ) and eight Democratic co-sponsors introduced legislation on Monday that would expand the federal government’s participation in oil markets, including by giving the president and Department of Energy new authorities to sell reserve oil outside of the circumstances generally provided under current law: emergencies and congressionally mandated sales.
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The Buy Low and Sell High Act would give the president the authority to designate a portion of the reserves as the “Economic Petroleum Reserve” and grant the Energy Department, which manages the Strategic Petroleum Reserve, the ability to sell barrels from the Economic Petroleum Reserve when oil is trading high.
This new Economic Petroleum Reserve would consist of no more than 350 million barrels of oil, and the “buy low” constraints would limit the Energy Department’s purchases to domestically produced crude oil sold at $60 per barrel or below. The department would be permitted to then sell the oil when prices exceed $90 per barrel on the U.S. West Texas Intermediate benchmark.
Proceeds earned on the barrels would then be marked to help states fund more electric vehicle infrastructure.
“Americans are tired of bearing the burden of our dependence on a volatile, unpredictable oil market controlled primarily by foreign dictators and adversaries,” Pallone, chairman of the House Energy and Commerce Committee, said in a statement. “It’s time for new, innovative solutions to keep bringing prices down, and that’s where the Economic Petroleum Reserve comes in.”
The bill “helps us regain control of domestic gas prices and protects drivers from future price fluctuations,” while also “[recognizing] that our reliance on fossil fuels makes us weaker,” he added.
Pallone’s bill also proposes to establish strategic gasoline and diesel reserves in every region of the United States, to be used during emergency disruptions. The Energy Department currently maintains small gasoline and home heating oil reserves, the latter of which contains distillate, from which diesel fuel is created, but they are confined to the Northeast.
Additionally, it would also prohibit barrels stored within the Strategic Petroleum Reserve from being exported or sold to “any entity owned, controlled, or influenced” by China, Russia, Iran, North Korea, or any other country under U.S. sanctions.
President Joe Biden has overseen the release of several hundred million barrels of Strategic Petroleum Reserve crude oil since November, when he first announced 50 million barrels of crude oil would be released.
Of those 50 million, 32 million barrels were made available via the Energy Department’s exchange capability, while 18 million barrels were made available pursuant to congressionally mandated sales.
Biden subsequently tapped the reserves multiple times on an emergency basis since the war in Ukraine began, which sent oil prices skyrocketing.
In March, Biden said the government would make an average of 1 million barrels a day of Strategic Petroleum Reserve oil available for sixth months in an effort to blunt prices.
Many Republicans criticized the move, arguing that he misused the reserves and that selling reserve barrels wouldn’t deal with the underlying fundamentals to reduce prices in a sustained manner.
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A recent Treasury Department analysis suggested that Biden’s emergency releases, in combination with the 60 million barrels made available by partners, may have been responsible for lowering the price of gasoline by between 17 cents to 42 cents per gallon.
The idea of actively looking to make a profit with the Strategic Petroleum Reserve is not novel. After COVID-19 lockdowns cratered the oil market, the Trump administration sought funding from Congress to stock up the Strategic Petroleum Reserve as a way to help the ailing oil industry and reap profits for the government, but it never got the appropriations necessary to do so.
The Energy Department intends to issue a call for bids this fall in order to purchase 60 million barrels of oil to begin replenishing the Strategic Petroleum Reserve. Deliveries will “be based on anticipated market conditions factoring in when future oil prices and demand are expected to be significantly lower, likely after FY 2023,” it said in May.
The Strategic Petroleum Reserve is made up of four storage sites, two each in Louisiana and Texas, that together have a storage capacity of 714 million barrels.
