Biden Eyes SPR Release Amid Soaring Summer Oil Demand

Biden administration halts SPR oil purchase as prices surge, focusing on fiscal prudence and market conditions.

By Athena Xu

4/15, 14:29 EDT
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Key Takeaway

  • Biden administration likely to use Strategic Petroleum Reserve to combat summer gasoline price spikes and inflation fears.
  • Gasoline prices up 17% this year, with oil demand expected to hit post-pandemic high during peak summer travel season.
  • High oil prices and geopolitical tensions contribute to supply deficits, complicating efforts to stabilize market.

Strategic Petroleum Reserve Strategy Shifts

The Biden administration has decided against proceeding with its plans to purchase up to 3 million barrels of oil for the Strategic Petroleum Reserve (SPR) in Louisiana, citing rising oil prices as the primary reason. This decision comes as the US benchmark West Texas Intermediate crude oil prices surged above $85 a barrel, marking the first time since October it has reached this level. The administration had previously set a target to buy oil at $79 or lower to refill the reserve, having spent an average of about $81 a barrel in its latest purchase of 2.8 million barrels.

Market Dynamics and Government Response

The Energy Department emphasized its commitment to keeping the taxpayer's interest at the forefront, indicating a strategic approach to purchasing based on market conditions. This move reflects a broader strategy to manage the SPR more dynamically, responding to global oil market fluctuations and domestic economic considerations. The department has been working on replenishing the SPR, which had hit a 40-year low following a record drawdown of 180 million barrels in response to Russia's invasion of Ukraine and subsequent global energy market disruptions.

Replenishment and Fiscal Prudence

Despite the halt in the latest planned purchases, the Energy Department has successfully bought back 32.3 million barrels for the SPR since last year, at an average price of under $77 per barrel, which is below the average price of $95 it sold for in 2022. This careful fiscal management underscores the administration's broader strategy to ensure the SPR continues to meet its national security mission without undue financial burden on taxpayers. Energy Secretary Jennifer Granholm highlighted the administration's replenishment strategy as both effective and innovative, aimed at delivering value for American taxpayers while maintaining the readiness of the SPR.

Street Views

  • Vikas Dwivedi, Macquarie Group (Bullish on oil demand):

    "The government will have to release oil from the SPR with a lot of aggressiveness to tame prices... There are not many tools available and this is one of the most effective."