Energy Department Offers 40 Million Barrels From Strategic Petroleum Reserve as Fuel Prices Rise

WASHINGTON - The U.S. Department of Energy said Tuesday that it is offering to loan energy companies up to 40 million barrels of crude oil from the Strategic Petroleum Reserve as the administration seeks to ease pressure from rising fuel prices and global supply disruptions.

The latest action comes as energy markets remain under pressure from the widening conflict involving Iran and the continuing effects of Russia's war in Ukraine.

Reuters reported the new 40-million-barrel offer Tuesday afternoon.

The crude is being offered as a loan, or exchange, rather than a permanent sale from the reserve.

Under the exchange structure previously outlined by the Department of Energy, participating companies are required to return the crude they borrow along with additional barrels at a later date.

The administration says that structure can provide oil to the market during periods of disruption while eventually replenishing the reserve with more crude than was initially released.

Part of larger international response

The 40-million-barrel offer is connected to a much larger emergency oil-market intervention agreed to earlier this year.

In March, the United States committed to making approximately 172 million barrels of crude from the Strategic Petroleum Reserve available as part of a coordinated action by International Energy Agency member countries.

IEA members agreed to make about 400 million barrels of emergency oil stocks available to global markets in response to severe supply disruptions caused by the Middle East conflict.

The International Energy Agency described the action as the largest coordinated emergency oil-stock release in its history.

The United States accounted for roughly 172 million barrels of the planned international response.

Previous 40-million-barrel offer drew little demand

The Department of Energy previously offered the final 40 million barrels associated with the U.S. commitment in June.

However, Reuters reported that energy companies agreed to borrow only about 500,000 barrels from that solicitation.

Tuesday's announcement again makes as much as 40 million barrels available to companies.

It remains unclear how much of the newly offered crude companies will ultimately agree to borrow.

The amount actually transferred from the reserve will therefore depend on participation by refiners and other eligible companies.

SPR has fallen to lowest level since 1982

The renewed offer comes as the Strategic Petroleum Reserve is already at its lowest inventory level in more than four decades.

Department of Energy data showed the reserve held approximately 283.8 million barrels of crude during the week ending Sept. 25, Reuters reported Monday.

That was the lowest level since October 1982.

The declining inventory reflects the large emergency drawdowns being carried out under the U.S. commitment announced earlier this year.

The reserve contained approximately 284.6 million barrels during the previous reporting week, according to Energy Information Administration data.

The Strategic Petroleum Reserve is the federal government's emergency crude-oil stockpile.

It was created to reduce the economic impact of major petroleum supply disruptions and to help the United States meet its international energy-security obligations.

Oil stored along Gulf Coast

SPR crude is stored in underground salt caverns at federal facilities along the Gulf Coast.

The Department of Energy says the reserve has an authorized storage capacity of 714 million barrels.

In its June solicitation for the same 40-million-barrel exchange, the department said crude would come from the Big Hill and Bryan Mound reserve sites.

Those facilities are located along the Texas Gulf Coast and are connected to major U.S. refining and pipeline infrastructure.

Companies participating in an SPR exchange receive federal crude in the short term and agree to return oil later, generally including additional premium barrels.

Fuel prices remain central concern

The administration's decision comes as disruptions to global energy markets continue to affect crude and refined fuel prices.

Reuters reported Tuesday that the administration is using the reserve in an effort to control sharply higher fuel prices associated with the widening conflict involving Iran and the effects of Russia's war in Ukraine.

The Middle East conflict has particularly affected shipping and energy flows connected to the Strait of Hormuz.

The waterway is one of the world's most important routes for crude oil and liquefied natural gas exports.

Disruptions there have reduced normal energy flows and contributed to substantial volatility in global petroleum markets.

Russia's war in Ukraine has created additional pressure through attacks on energy infrastructure, sanctions and disruptions affecting Russian refining and petroleum exports.

Those overlapping pressures have increased the importance of emergency oil inventories in the United States and other major economies.

Global stock release unprecedented

The International Energy Agency said its members initially agreed in March to make 400 million barrels available because the Middle East conflict had created an unprecedented global oil-supply disruption.

Final country commitments later brought the total planned international response above 400 million barrels.

The United States represented the largest single national contribution.

IEA officials have said emergency inventories can provide an important temporary buffer but cannot permanently replace normal global oil production and shipping.

The agency has emphasized that restoring regular transit through the Strait of Hormuz remains critical to stabilizing international energy flows.

What happens next

Energy companies will now determine how much of the latest 40-million-barrel offer they want to borrow.

The previous solicitation resulted in demand for only a small portion of the available crude, making industry participation an important factor in determining the actual size of the latest release.

Any crude borrowed under the exchange program would eventually have to be returned to the Strategic Petroleum Reserve under the terms established by the Department of Energy.

The administration is seeking to put additional supply into the market at a time when consumers and businesses are facing elevated fuel costs.

At the same time, the latest offer comes with the reserve at its lowest level since 1982, highlighting the balance policymakers face between addressing immediate market disruptions and preserving emergency inventories for future supply shocks.