As a response to US President Donald Trump's directive to aid local crude producers by filling up the country's emergency stockpile, the US Department of Energy announced on Thursday its plans of buying up to 30 million barrels of crude oil.
The agency revealed that the purchased oil should be added to the country's Strategic Petroleum Reserve by the end of June. The reserve, which is located in Texas and Louisiana, currently has a capacity of 77 million barrels.
The energy department stated that the 30 million barrels it will purchase will be a combination of both sour and sweet crude oil that will be sourced from small to mid-sized producers across the country. This will include producers with less than 5,000 employees.
Energy Secretary Dan Brouillette told reporters during a teleconference that the department will still have to secure the budget to fill up the reserves. Funding to purchase all 77 million barrels needs to be included in new stimulus legislation before they can act. According to the official, they have already asked Congress $3 billion to get the ball rolling.
The 30 million barrels will be the first round of purchases, with a second-round likely happening within 60 to 90 days. Brouillette stated that they are moving as fast as they possibly can with the budget they currently have.
Analysts have pointed out that the energy department's move is a necessary step towards fulfilling the mandate to fill the country's reserves. However, achieving that goal will not be as easy as it will be dependent on the approval of future funding.
Treasury Secretary Steven Mnuchin previously stated that he has suggested to Trump that the country take advantage of the low oil prices by asking Congress for a budget of $10 billion to $20 billion to fill up the country's reserves. Mnuchin told reporters that the country should fill up its reserves for the long-term.
The recent collapse of the pact between Russia and Saudi Arabia, exacerbated by the continued spread of the coronavirus, has managed to plunge global oil prices to all-time lows. On Thursday, US oil prices managed to increase by about 12 percent, closing at a still-low $23 per barrel.
Environmental groups and critics of the administration have pointed out that the government shouldn't be focusing on filling up its reserves right now as there are more immediate concerns facing the country. A a nonprofit organization called the Center for Biological Diversity criticized the administration's decision and stated that the government should instead focus on the global pandemic and the planet's climate condition.
