Despite announcing aims to refill the U.S. strategic oil reserve by the end of the year, the Biden Administration has decided not to go ahead with its plan amid high oil prices. Following months of stable crude prices, the recent spike in the Brent Benchmark has led the government to reconsider its aim to replenish reserves, a target that was expected to safeguard the country’s energy security.
In March, Energy Secretary Jennifer Granholm announced plans to refill the country’s strategic oil reserve by the end of 2024 after U.S. crude stockpiles were depleted last year, falling to a record low. The government used significant oil supplies from the Strategic Petroleum Reserve (SPR) following the Russian invasion of Ukraine and subsequent sanctions on Russia’s energy products.
The U.S. accessed around 274 million barrels of oil from the SPR between September 2021 and July 2023, resulting in stockpiles falling to the lowest level in four decades. The SPR was originally established to boost U.S. energy security following the 1973 energy crisis. The move by Biden to use these supplies has, therefore, been widely criticized by the Republican Party. However, the government has been working over the last 10 months to buy back oil to boost the reserve, adding around 14.7 million barrels, according to the Energy Information Administration (EIA). In reality, SPR supplies have increased by around 30 million barrels since last June, according to Granholm.
Granholm stated at the CERAWeek energy conference in Houston in mid-March, “By the end of this year we will essentially be back to where we would have been absent the sales.” This would mean adding 140 million barrels to the reserve. This was expected to be possible thanks to the greater stability of oil prices in recent months, following almost two years of volatility.
However, despite only recently announcing plans to increase U.S. oil reserves to boost the country’s energy security, the Biden Administration announced this week that it will not move forward with the plans, mainly due to rising energy prices. The Department of Energy (DoE) said that it was “keeping the taxpayer’s interest at the forefront” in deciding not to buy back up to three million barrels of crude for the SPR. The DoE stated, “We will not award the current solicitations for the Bayou Choctaw SPR site and will solicit available capacity as market conditions allow.”
This decision follows a rebound in oil prices, as the Brent Benchmark rises to just under $90 a barrel. This is the first time that crude prices have risen to over $85 a barrel since October, disrupting several months of stability. The Biden Administration had previously hoped to buy back its crude reserves at around $79 a barrel.
Earlier in the year, Shale Magazine Editor-in-Chief Robert Rapier predicted “By the time the summer driving season and the change to summer gasoline blends arrives in May, I think the SPR purchases will be suspended.” And now, Bob McNally, the president of Rapidan Energy Group, believes “Domestic crude prices are likely to remain too high for the remainder of the year for DoE to resume its refilling program.”
The DoE maintains that it will “continue to monitor market dynamics.” However, as OPEC extends its production cuts, of 2.2 million barrels per day, to the second quarter, and with sanctions on Russian crude still in place, the price per barrel is unlikely to fall sufficiently enough for the Biden administration to buy back supplies any time soon.
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Felicity Bradstock is a freelance writer specializing in Energy and Industry. She has a Master’s in International Development from the University of Birmingham, UK, and is now based in Mexico City.
