The Biden administration has been slowly replenishing stocks in the Strategic Petroleum Reserve (SPR) as oil prices fell in the fourth quarter, buying crude at prices that could rate the president as an oil trading legend.
The SPR is an emergency stash of crude oil — the world’s largest — that was created to ease oil supply problems or shortages. It was created in 1975 following the Arab oil embargo that saw crude and gasoline prices spike, and caused damage to the economy.
Back in 2022, in response to a price spike after Russia invaded Ukraine, President Biden ordered the release of 180 million barrels from the SRP to calm the market, bringing the price of Nymex WTI crude back from a highs well above $100 a barrel, to below $80.
See Also: US Is Producing More Oil Under Biden Than At Any Point Under The Trump Administration
It helped also to bring gasoline prices at the pump lower during a period when inflation was nearing its July 2022 peak of 9.1%. The Biden administration was using oil as a monetary tool.
Careful Replenishing
The Department of Energy said in a statement on Thursday: “Analysis from the Department of the Treasury indicates that SPR releases in 2022, along with coordinated releases from international partners, reduced gasoline prices by as much as 40 cents per gallon.”
In October 2023, the price of WTI climbed to a high of $95. It then embarked on a two-month decline brought about by slowing demand fears as measures of economic activity pointed to a easing in growth.
As prices fell below $80 a barrel in November and December, the government slowly started buying oil to replenish SPR stocks.
Thursday’s Energy Department statement said the administration has bought back 20.13 million barrels of domestically produced crude at an average price of $76.12. It recalled nearly 4 million barrels of crude on loan to oil companies. They’re expected to arrive back at the SPR this month.
The DOE also said it was issuing a new solicitation for up to 3 million barrels to replenish the reserve further.
Biden The Oil Trader
So let’s look at the numbers to see exactly how good an oil trader Biden is. The administration sold in 2022 at an average of about $95 per barrel, the DoE said. It has so far repurchased at $76.12. That’s very savvy trading so far.
However, it can’t be judged to have been a total success until all 180 million barrels have been recovered. Much could happen to long-term price expectations over the five years the administration set for complete recovery — geopolitically and domestically.
Biden may not secure a second presidential term, and a new president could decide the SPR needs replenishing more quickly. Larger and more regular purchases could drive crude prices higher, which would raise the cost of replenishment.
On Friday, oil prices were lower, with WTI down 2.3% at $72.22 a barrel, while the United States Oil Fund USO an exchange-traded fund that tracks the price of light-sweet crude, fell 2% to $67.69. The Energy Select Sector SPDR XLE, which tracks the performance of U.S. oil companies, was up 0.7%.
Now Read: Biden The Master Oil Trader Part Deux? Crude Prices Plummet. Is A Government Windfall Coming?
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