US sells 18 mn barrels of oil from strategic reserve to reduce prices

The Energy Department announced the first sale of 18 million barrels of oil from the US Strategic Petroleum Reserve (SPR) aimed at reducing pump prices of fuel that had hit seven-year highs and raised inflation woes.

"Exchanges and sales from the Strategic Petroleum Reserve are important tools we are using to address oil supply disruptions as the world recovers from a once-in-a-century pandemic," Energy Secretary Jennifer Granholm said in a statement on Friday. "The President rightly believes Americans deserve relief now and has authorized the use of the SPR to respond to market imbalances and reduce costs for consumers."

According to the Energy Department, crude from SPR will be sold and later exchanged with US refiners to refill the strategic reserve, the statement said. Up to 32 million barrels will be released through the so-called exchange-and-sale approach, it also said. The first such exchange-and-sale, for 4.8 million barrels, will be with ExxonMobil, it added.

President Joe Biden announced last month that the United States will release 50 million barrels from the SPR from mid-December onward, under a coordinated action with other major oil consuming countries, to tamp down fuel prices that were retailing at seven-year highs in October.

Pump prices had come down lately, retailing at an average of $3.33 per gallon this week, according to the American Automobile Association. Biden said on Thursday that he expected further reductions in coming weeks and months as his administration made more use of the SPR.

Biden has been criticized for using the nation's oil reserves to fight inflation when such supplies are typically used to fill shortages in times of crisis in oil supply. Inflation in the United States has grown by its fastest pace in almost 40 years, the Consumer Price Index indicated, as the economy rebounded from the 2020 crisis brought about by the coronavirus pandemic measures.

Aside from special allocations, like those announced by Biden, the SPR is commonly used to fill crude oil shortages forced by production outages related to hurricanes and other natural calamities. The United States has had a string of hurricanes this year, mostly notably Ida, which shut down more than 90% of oil and gas production in September.

The Energy Information Administration said last month that based on the scheduled releases of the SPR, the United States' crude reserves could be halved by 2032, bringing it to the lowest level since March 1983.