US approves largest-ever crude sale from SPR
The US Strategic Petroleum Reserve (SPR) is set to fall to almost half its capacity by 2027 as part of a bipartisan two-year budget agreement that would sell 100mn bl of crude from the reserve.
President Donald Trump signed the budget bill this morning after a series of late-night votes in the US Congress. The measure will boost government spending by about $300bn, provide $90bn in emergency relief and extend tax breaks for renewable energy and some biofuels. It also ended a brief government shutdown that lasted about nine hours.
Almost none of that spending is paid for, meaning the majority will come from more government borrowing. The measure comes eight weeks after Republicans approved a sweeping tax overhaul that is projected to add at least $1 trillion to the deficit. The 100mn bl in oil sales would generate more than $8bn at current price projections, offsetting a small fraction of the budget agreement’s cost.
US energy security experts have criticized the decision by lawmakers to sell so much crude from the SPR, which held 695mn bl one year ago but is projected to fall to 405mn bl if all planned oil sales go forward. Critics say those volumes would provide an insufficient cushion of oil during a major emergency or supply shock.
Congress approved its first two oil sales in 2015, through a budget deal and highway funding bill that sold 124mn bl. Another 25mn bl was sold 2016 for medical research and 7mn bl more made it into last year’s tax bill. And a $2bn SPR modernization program is being paid for with sales expected to reach 34mn bl by 2020.
Those sales, along with today’s budget agreement, will sell 290mn bl by 2027 and send the SPR down to volumes not seen since 1984. But the US is still likely to meet requirements as part of its membership in the IEA to hold 90 days of the prior year’s net petroleum imports, which combine crude and refined products.
The US is now required to hold about 370mn bl of petroleum in reserve based on current import levels, but by 2030 that requirement could fall to zero as oil production grows and consumption declines. The US is projected to become a “modest” net petroleum exporter by 2029, the US Energy Information Administration said earlier this week.
The Heritage Foundation and other conservative groups have pushed to sell off the entire reserve, which they say is unneeded in light of booming oil production and private inventory. Trump last year proposed in his budget request to close two of the SPR’s four storage facilities and sell off 270mn bl of oil that was unsold at the time.