The Energy Department has started soliciting crude oil from small and midsize producers to fill the Strategic Petroleum Reserve and soften the blow of lower demand due to the COVID-19 pandemic and disruptions created by Saudi Arabia and Russia.
The government plans to initially buy 30 million barrels and ramp up its total purchase to 77 million barrels — enough to fill the strategic reserves to the brim.
“The purpose of this is to mitigate these types of disruptions,” Secretary of Energy Dan Brouillette told reporters Thursday.
He said the federal government is also taking advantage of current low prices to purchase the oil.
“If you believe in the purpose of the SPR, now is the perfect time to make sure it’s full,” Brouillette said.
Oil prices have tumbled in recent weeks to near 30-year lows after Saudi Arabia and Russia failed to agree to lower their production and instead moved to flood the markets with more oil, driving down prices.
On Thursday, the credit ratings agency Fitch Ratings slashed its oil price outlook for 2020 to $38 a barrel for west Texas crude, the U.S. benchmark, from its prior projection of $57.50 a barrel.
The DOE earlier this month delayed a planned sale of oil from the strategic reserve as oil prices plummeted on news of the Saudi Arabia-Russia impasse.
Buying oil from U.S. producers would help reduce the supply glut and help prop up prices. Still, the DOE would require Congress to appropriate the $3 billion Brouillette said is needed for the purchase.
“We’re expecting that Congress is going to be supportive of this,” he said.
Neither House nor Senate Energy-Water appropriators immediately responded to a request for comment.
Senate Energy and Natural Resources Chairwoman Lisa Murkowski, R-Alaska, said buying the oil to fill the petroleum reserves would help her state’s economy, which is “inextricably” tried to oil markets.
“I support President Trump’s proposal to fill the Strategic Petroleum Reserve — right now, we have an opportunity to buy low and buy American — and my team and I are working with Senate leadership and administration officials to make that happen,” Murkowski said in an emailed response.
Earlier on Thursday, Treasury Secretary Steven Mnuchin told Fox Business News that he would recommend Trump ask Congress for $20 billion to buy oil to fill the reserve, an amount that appeared to surprise Brouillette.
“I’m going to call Secretary Mnuchin to find out exactly what really his comment was,” the Energy secretary said.
Meanwhile, environmental groups are taking issue with the administration’s efforts to buoy the oil industry at a time when many workers and families across the country face financial ruin from the COVID-19 fallout.
“The Trump administration’s proposal to spend $20 billion for their oil industry buddies is as tone deaf as it is morally bankrupt,” said Brett Hartl, government affairs director at the Center for Biological Diversity. “People are suffering and dying, but all Trump and Mnuchin care about is keeping the fossil fuel industry rich while our planet’s climate unravels and a global pandemic rages.”
Lukas Ross, senior policy analyst with Friends of the Earth, an environmental advocacy group, accused the administration of exploiting a national crisis to “throw billions of dollars at polluters,” and urged Congress to reject any requests for additional money for oil purchases.
“The fossil fuel industry does not deserve a bailout now or ever, the American people do,” Ross said in a news release.
Another phase of oil solicitations could come within 60 to 90 days, according to Brouillette. However, if oil prices rebound, he said, the government would “exit the market.”