White House begins plan to refill US emergency oil reserves

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The Biden administration is making good on a plan to replenish the nation’s emergency oil reserves, starting with a 3-million-barrel purchase of crude.

The purchase of barrels for February delivery follows a historic 180-million-barrel release of oil from the US Strategic Petroleum Reserve to tame high gasoline prices amid Russia’s invasion of Ukraine and other supply issues.

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“This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security,” the Energy Department said in a notice Friday announcing the plan.

US benchmark oil futures pared losses on the news, trading around $75 a barrel Friday afternoon.

The Biden administration previously laid out a plan to repurchase oil for the approximately 700 million barrel-strong reserve when the price of crude hit around $70 a barrel.

In addition, the DOE is planning a roughly 2-million-barrel crude oil exchange to meet emergency supply needs caused by the shutdown of TC Energy Corp.’s Keystone pipeline, a senior administration official said Friday. In an exchange, an entity — often a refiner — borrows from the SPR for a brief period due to extreme circumstances and later replaces it in full, along with a premium of an additional amount of oil, according to the agency’s website.

The purchases are being made using a new rule tweak that allows the Energy Department to buy oil using fixed-price contracts. Previously, the DOE could enter into contracts for future delivery, but the price paid reflected prices at the time the product was delivered.

Read more: Oil demand growth set to slow but stay robust in 2023, as China opens up: IEA

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