The U.S. Department of Energy’s Office of Petroleum Reserves has awarded contracts for the purchase of 3 million barrels of domestically produced crude oil for the Strategic Petroleum Reserve (SPR). These contracts were awarded following the Request for Proposal that was announced on May 15, 2023. Additionally, the DOE has issued a new Notice of Solicitation to acquire approximately 3.1 million more barrels of crude oil for the Big Hill SPR site in September as part of the Biden-Harris Administration’s three-part replenishment plan.
This announcement supports the President’s replenishment strategy, which was put in place after the historic release from the SPR to manage the significant global supply disruption caused by the war in Ukraine. According to an analysis by the Department of the Treasury, the SPR releases last year, along with coordinated releases from international partners, resulted in gasoline prices that were about 40 cents lower per gallon than they would have been without these drawdowns.
Ten companies submitted 30 proposals in response to the Request for Proposal, and the contracts were awarded to five of them. The purchase of the 3 million barrels has been fully subscribed, and the crude oil will be delivered to the Big Hill SPR storage site between August 1 and August 31, 2023. The average price per barrel for this purchase is approximately $73, which is lower than the $95 per barrel average price for SPR crude sold in 2022, providing taxpayers with a good deal.
The Administration’s three-part replenishment strategy includes:
- Direct purchases with revenues from emergency sales;
- Exchange returns that include a premium to volume delivered; and
- Securing legislative solutions that avoid unnecessary sales unrelated to supply disruptions. DOE has already secured the cancellation of 140 million barrels in congressionally mandated sales scheduled for Fiscal Years 2024 through 2027. This cancellation has led to significant progress toward replenishment.
New Solicitation for Additional 3 Million Barrels of Crude Oil to Refill the SPR
The Department of Energy (DOE) has announced a new Notice of Solicitation for the purchase of approximately 3 million barrels of sour crude oil for the Strategic Petroleum Reserve (SPR) at the Big Hill SPR site. The oil is expected to be received in September 2023, and bids for this solicitation must be submitted by June 20, 2023, at 10:00 a.m. Central Time. Successful bidders will be awarded contracts by June 30, 2023. This purchase is part of the Biden-Harris Administration’s three-part plan to replenish the SPR, and the DOE plans to pursue additional repurchase opportunities this year based on market conditions.
The SPR is the largest emergency crude oil supply in the world, with federally-owned oil stocks stored in underground salt caverns at four sites in Texas and Louisiana. The DOE is committed to maintaining the operational integrity of the SPR through scheduled maintenance and the Life Extension 2 program to ensure it can continue to play a critical role in providing energy security. The SPR has a long history of protecting the American economy and livelihoods during times of emergency oil shortages.
