White House Delays Refill Of Strategic Oil Reserve, Balks At “Too Expensive” Offers – Zero Hedge, 2023/01/07
The Biden administration had no problems aggressively draining the SPR by 1mmb/d at market prices in the immediate aftermath of the Ukraine war, in hopes of lowering the price of gasoline ahead of November’s elections and avoiding an inflationary midterm rout. However, when it comes to refilling the SPR, now that US emergency inventories are down to the lowest level since November 1983 and not too far from an all time low which threatens the structural integrity of the salt caverns the oil is deposited in… the White House has “unexpectedly” gotten cold feet.
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According to Bloomberg, the Biden administration has delayed the replenishment of the nation’s emergency oil reserve after deciding the offers it received were either too expensive or didn’t meet the required specifications. Citing “people familiar” the report adds that “the Department of Energy rejected the several offers it got for a potential purchase in February.” In other words, absent a brutal US or global recession which drags oil far lower – courtesy of the Fed which is doing Biden’s bidding of containing inflation by crushing the US economy with the highest interest rates in a generation – the SPR won’t get any more oil.
While the DOE will put off the purchase it had originally planned for next month, the proposed program, which used a new approach that accepts fixed-price offers, will continue, one of the people said. Of course, it will “continue” only as long as oil is below a certain White House mandated threshold, anything above that – as we now can see – means no refills. As a reminder, last year there were reports that the Biden administration had planned to start buying crude when it dropped around $70 a barrel; and while oil fell during the fourth quarter and US benchmark prices fell close to those levels last month, they have since rebounded, with the SPR refill price serving as a market support level.
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So much is wrong with this. Anyway – $70 per barrel is when they will start refilling the reserve. We will see what happens.
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