The budget deal that Congress struck yesterday includes the sale of 100 million barrels of crude oil from the U.S. Strategic Petroleum Reserve (SPR) beginning in 2022. At today’s prices that much oil has a value of about $6.1 billion ($61.10 a barrel as this is being written).
The initial impact is to push crude prices down about 1%. That won’t have much impact on retail prices, and there is unlikely to be any long-term damage to crude prices if Congress passes the legislation and the president signs it.
According to a report at Reuters, the first sale of some 30 million barrels would be sold between 2022 and 2025, 35 million barrels would be sold in 2026, and another 35 million barrels would be sold in 2027. As of Wednesday, the U.S. SPR held 665.1 million barrels of its theoretical capacity of 727 million barrel capacity.
The U.S. Department of Energy was scheduled to receive bids on 8 million barrels of SPR crude oil currently last month for deliveries commencing on March 1. Since January 6, the SPR has declined by 30 million barrels and no one even noticed.
At today’s level the SPR is equal to 143 days of U.S. import requirements. As a member of the OECD, the United States has committed to maintaining a strategic reserve equal to 90 days of import quantities. The average price paid per SPR barrel is $29.70.