Oil prices have sputtered since the U.S. began selling its stockpiles
Head of state. Commander in chief. Oil-trading whale?
President Biden’s unprecedented release of oil from the U.S. petroleum reserves in 2022 turned the White House into an unusually active player in the volatile crude market. The flood of emergency supplies helped arrest surging oil prices after Russia invaded Ukraine, and pulled billions of dollars into the Energy Department’s coffers in the process.
Oil prices have sputtered since and allowed officials who sold high to start replenishing U.S. stockpiles on the cheap. The question that will echo from Washington to Wall Street in 2024 is how the Biden administration might finish off a trade many investors would envy.
The Energy Department says it has already snapped up about 13.8 million barrels of crude, with accelerating deals in recent weeks signaling the agency could move more aggressively in 2024.
At an average price of $75.63 a barrel, the purchases so far total a nearly $270 million theoretical discount from 2022’s average sale price of $95 a barrel.
The Energy Department will have about $3.45 billion left to buy more oil after those deliveries are complete, a spokeswoman said. That is enough cash for tens of millions more barrels of crude.
The Biden administration’s opportunity to build on its gains could slip away if prices rise. Benchmark U.S. crude changed hands Friday at $71.65 a barrel, well below the administration’s asking price of $79 or lower, even as fallout from the Israel-Hamas war threatens tankers in one of the world’s most important shipping lanes.
Any major ramp-up in deals would come with challenges. It could strain the country’s ability to release emergency supplies, because storage sites can’t accept crude at the same time. The facilities, some of which are currently undergoing maintenance, are also limited in how much they can receive each month.
But some traders and analysts say locking in future purchases at today’s prices could help turn U.S. stockpiles into a force for market stability and expand America’s clout as an energy superpower.
“Even if it’s at a small size, being able to exert that muscle could be very valuable,” said Skanda Amarnath, executive director of the macroeconomic policy think tank Employ America.
The U.S. and other countries began amassing stockpiles in the 1970s, aiming to hold 90 days’ worth of net imports, after the Arab oil embargo sent prices skyrocketing in an inflationary shock to the American economy.
The Strategic Petroleum Reserve peaked in size in 2010 near 727 million barrels, according to the Energy Information Administration. Since then, booming shale output helped the U.S. become the world’s largest oil producer, and officials from both parties pushed to sell off some of the stockpiles to fund other projects.
Biden’s release after Russia’s invasion of Ukraine was the largest ever. Emergency sales of roughly 180 million barrels helped shrink the reserves to as little as 347 million barrels, a 40-year low.