The Energy Department moved to buy up to a million barrels of crude oil from U.S. producers to store in the Strategic Petroleum Reserve to help the industry struggling with a supply glut and weak demand due to the coronavirus pandemic.
The agency said Wednesday afternoon it was soliciting the oil from small and medium-sized producers that have to submit bids by May 27.
Lawmakers from oil states have been pushing for the administration to take advantage of current low oil prices to fill the national stockpile while helping oil companies running out of storage for their surplus.
Sen. John Hoeven, R-N.D., has introduced legislation to approve $3 billion for federal oil purchases, a measure opposed by most Democrats who view it as a handout to an industry facing problems that predate the coronavirus pandemic.
Sen. Kevin Cramer, R-N.D., a cosponsor of that bill last month said it’s “a small, simple way” to help local producers. He has called for Congress to “play its part” by including such funding in an economic relief package.
The House coronavirus recovery bill released Tuesday doesn’t include a provision to stock up the SPR.
At least one key House Democrat, however, supports such a move. On Tuesday, House Majority Leader Steny H. Hoyer, D-Md., told reporters he thinks “this is a time to restock the Strategic Petroleum Reserve and make sure that” the country has sufficient supplies if it runs into a crisis.”
Disruptions from global oversupply triggered by a Saudi Arabia-Russia price and production war in March, as well as the economic impact of the coronavirus, have depressed oil prices and left producers with more inventories than they can sell.
Oil prices are now at the lowest they’ve been in about two decades, according to the Energy Information Administration.
Even though prices have picked up from their worst dip when they fell below zero last month, oil is still selling well below the break-even point for many producers and the EIA estimates the industry will not start recovering until the second half of 2021.
The DOE’s move to buy oil builds on other actions the administration is taking to help the struggling oil industry. Last month, the agency announced it would lease space in the SPR for oil companies to store their excess oil. In exchange, the companies would leave some of their product in the stockpiles when the time comes to withdraw their oil.
Lindsey McPherson contributed to this report.