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The United States is taking advantage of falling oil prices to start accumulating crude oil and preparing for the future.

The United States is the largest oil producer in the world, but it has no control over this market. Its producers are small, medium and large companies that are governed by market rules to make their production and investment decisions. So The United States prefers to have a state strategic reserve of several hundred million barrels. of crude oil to be able to use it if market conditions deteriorate (oil shortage with very high prices for example). When crude oil prices are low (they have fallen more than 20% since July), the United States typically attempts to replenish this reserve by purchasing several million barrels.

So, now that crude oil is trading around $70 a barrel, in the case of Brent, while Texas is even below 70, the United States has been buying 6 million barrels of oil for the Strategic Petroleum Reserve (SPR) to be delivered until May 2025, the Ministry of Energy reported Monday, in a note collected by the agency. Reuters.

The United States Strategic Petroleum Reserve It is the world’s largest emergency oil reserve, managed by the U.S. Department of Energy.. Established in 1975 in response to the 1973 oil crisis, its primary purpose is to protect the U.S. economy in the event of a significant disruption to global oil supplies. The reserve is stored in a series of underground caverns, formed in the natural salt deposits of the Gulf Coast, more precisely in the states of Louisiana and Texas.

The purchases are part of an effort to replenish reserves after President Joe Biden ordered the largest reserve sale in history in 2022, of 180 million barrels, in an effort to control fuel prices after the Russian invasion from Ukraine.

Oil purchases

The United States bought 3.5 million barrels to Exxon Mobil, 2 million to Shell Trading Company and 500,000 to Macquarie Commodities Trading US, for a total cost of more than $411 million, the department said.

Sour crude, or the oil that many U.S. refineries are designed to process, will be delivered in the amount of 1.5 million barrels from February to May next year to the Bayou Choctaw site in Louisiana.

After this date, The ministry only has enough money in its SPR procurement fund to buy another 2 million barrels at around $75. per barrel. To continue fulfilling the SPR after that date, the Department will need to ask Congress for more money and/or convince Congress to cancel future congressionally mandated sales.

Nearly two years ago, the department worked with Congress to help replenish the SPR by canceling sales of 140 million barrels that had been ordered through 2027 to raise money for government programs.

Major movements of the SPR

Throughout its history, there have been several significant episodes in which the SPR has been used, both for emergency sales and strategic purchases. For example, during the Gulf War in 1991The SPR was used to release oil to the global market and stabilize prices, as Iraq’s invasion of Kuwait sparked fears of a supply shortage.

One of the biggest sales events occurred in 2005, after Hurricane Katrina, which devastated oil infrastructure in the Gulf of Mexico. The SPR released more than 11 million barrels of oil to ease the disaster’s impact on the United States’ energy supply.

Another significant sale took place in 2020, during the crisis caused by the COVID-19 pandemic. With the drastic fall in demand for oil and the collapse of pricesthe U.S. government took advantage of this to purchase and store large quantities of oil while the price was at historic lows, thereby strengthening reserves at very low cost.

More recently, in 2022, the SPR was used heavily in response to the war between Russia and Ukraine, which caused great volatility in the global energy market. President Joe Biden authorized the release of 180 million barrels to counter rising global oil prices, the largest reserve release in SPR history.

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Katy Sprout
Katy Sprout
I am a professional writer specializing in creating compelling and informative blog content.
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