Diesel has broken above the psychological barrier of $4 per gallon on average in the United States, with an industry expert saying that part of what’s pushing up prices at pumps across the country is the Biden administration’s refilling of the Strategic Petroleum Reserve (SPR) after depleting it to a 40-year low.
A day later, on Aug. 1, diesel prices rose to $4.073 a gallon, with the steady climb coming on the back of a five-week long rally in crude oil prices that has been bolstered by various factors, including reduced output from countries like Saudi Arabia—and refilling of the SPR.
“Up until the end of June, the Strategic Petroleum Reserve was releasing oil almost on a weekly basis, which was helping to add supply into a market,” GasBuddy Head of Petroleum Analysis Patrick De Haan told Spectrum News on Monday.
“That’s part of the reason why Saudi Arabia and Russia cut production. But now, the releases from the SPR have ended and that’s actually probably pushing prices up, because now, the SPR is slowly being refilled,” he continued.
Other factors pushing up prices of diesel (and gasoline, which hit $3.78 per gallon on Aug. 1) were heat-related outages at some major refineries in Louisiana and Texas, he told the outlet.
Refilling SPR
The strategic reserve, which was filled to its then 727 million barrel storage capacity a little over a decade ago, remains near a multi-decade low at 346.8 million barrels, the latest federal data shows.“The DOE remains committed to its replenishment strategy for the SPR, including direct purchases when we can secure a good deal for taxpayers; exchange returns; and cancellation of planned sales where drawdown is unnecessary, in coordination with Congress,” Energy Department Deputy Chief of Staff Bridget Bartol told the outlet.
DOE officials said earlier that purchases of oil for the SPR would be made when crude fell to roughly $67 to $72 a barrel.
Energy Secretary Jennifer Granholm has said that the process of refilling the reserve could take years as a quick buyback program could lead to price spikes and revive inflationary pressures.
Senate Amendment to Shield SPR
In a bid to protect the strategic stockpile, the Senate recently passed an amendment to the annual defense bill that would ban oil exports to China and other adversarial nations from the SPR.The measure amends the National Defense Authorization Act (NDAA) to ban sales of oil from the strategic reserve to China, North Korea, Iran, and Russia.
Part of what drove the two senators to push the amendment was the fact that, while the United States ramped up crude production and exports to meet global demand as some supply went offline in the wake of Russia’s invasion of Ukraine, some other countries took a different approach.
Last July, in a sale of 39 million barrels from the strategic stockpile that was part of the Biden-ordered drawdown, around 1 million barrels went to UNIPEC America, a Houston-based arm of China’s Sinopec.
“We know China has been amassing the largest stockpile of crude in the world. Nevertheless, last year, the United States sold off part of our reserves to China,“ Mr. Cruz said in a statement. ”I have been working with Senator Manchin to prohibit such inexplicably reckless moves in a bipartisan way.”
“We should not be selling our emergency oil reserves to our adversaries,” Cruz added.
The Senate passed its amended version of the defense bill last week, teeing up a showdown with the House, which must give its stamp of approval on the measure before it heads to Mr. Biden’s desk for a signature.