The US Congress is poised to approve a budget deal Thursday that mandates the sale of 100 million barrels of crude oil from the Strategic Petroleum Reserve and authorizes sales of another $350 million worth of government-owned crude.
The two-year budget deal, which is expected to be voted on by the Senate and then the House of Representatives Thursday, calls for a total of 30 million barrels of crude to be sold from the SPR in fiscal 2022 through 2025, 35 million barrels to be sold in fiscal 2026, and 35 million barrels in fiscal 2026.
A Congressional Budget Office analysis of the bill, released Thursday afternoon, claims the sales would raise $6.36 billion in federal revenue between 2022 and 2027. The analysis assumes an average oil price of nearly $64/b, but ignores the initial cost of purchasing the crude and the costs of storing it in underground salt caverns for years.
The legislation, needed to avert a government shutdown Friday, also authorizes sales “not to exceed” $350 million worth of crude from the SPR in fiscal 2018. Proceeds from the 2018 sales, which were initially mandated in a 2015 budget bill, will be used for upgrading and modernizing the SPR, according to the text of the bill.
The proposal to sell off 100 million barrels from the SPR, the largest non-emergency selloff of government-owned crude in US history, would hinder the purpose of the stockpile, which was created to lessen the impact of a potential supply shock in the global oil market, said Robbie Diamond, president and CEO of Securing America’s Future Energy.
“Geopolitical risk is alive and well in the oil market, and the SPR is America’s only formal short-term line of defense against oil supply disruptions and price spikes,” Diamond said.
Kevin Book, managing director with ClearView Energy Partners, called the proposal to sell 100 million barrels of SPR crude “a resounding declaration of lawmakers’ new perspective on energy security.”
As of Friday, the SPR held 665.1 million barrels of crude, including 406.2 million barrels of sour crude and 258.9 million barrels of sweet.
Millions of barrels of crude were already scheduled to be sold from the reserve in sales mandated by Congress through 2025. If Congress approves the budget bill Thursday and President Donald Trump signs it into law, the SPR will hold as little as 406 million barrels of oil within a decade after all the mandated sales, or about 56% of its total capacity, according to estimates from the Department of Energy, which manages the reserve.
The Trump administration last May announced plans to sell off 270 million barrels of crude from the SPR over the next decade, while shutting down two of four storage sites along the Gulf Coast, and selling a 1-million-barrel gasoline reserve to the highest bidder. The administration later backed off of those plans.
The US in 1974 reached an agreement with 29 International Energy Agency countries to hold inventories equal to at least 90 days of net crude and petroleum product imports. The SPR currently holds an estimated 141 days of import protection, and if domestic commercial stocks are counted, the US holds 216 days of import protection, according to the Government Accountability Office. BIODIESEL CREDIT
The budget deal to be voted on Thursday also includes a $1/gal US tax credit for blending biodiesel, which would be restored retroactively through end-2017.
The biodiesel tax credit expired at the end of 2016.
Biofuel proponents have been lobbying for a multi-year extension of the incentive since its expiration, and some had urged Congress to convert it from a blender’s credit to a producer’s credit so it would no longer apply to imported fuel.
Source: PlattsPrevious Next