According to Reuters, the U.S. government announced on September 29 that it is proposing to lend up to 40 million barrels of crude oil from its strategic petroleum reserves to energy companies. The U.S. initiated the Global Reserves Release Program after attacking Iran, and these are the last barrels of crude oil involved in this program.
The United States is lending oil from its strategic petroleum reserves to companies, who will repay with crude oil. The premium could be as high as 24%. The department stated that this mechanism will help stabilize the market and will not impose any costs on U.S. taxpayers. However, it is expected that the entire process of returning the oil will not be completed until the end of 2028.
All companies must submit their oil borrowing proposals by October 6th.
In March, the U.S. government agreed to lend 172 million barrels of oil from its strategic petroleum reserve, as part of a broader agreement with the International Energy Agency involving about 30 countries. The agreement aims to release 400 million barrels of oil from petroleum reserves around the world.
In June, the United States proposed to lend out the last 4 million barrels of crude oil from this agreement. However, later that month, it was revealed that only about 500,000 barrels of crude oil received the consent for lending from the company.
U.S. Energy Secretary Lighthizer stated that the U.S. and Japan have fulfilled their commitments under the agreement, but he simultaneously criticized "a few European member states for releasing only a small portion of their pledged crude oil and petroleum products."
Reuters previously reported that the White House has urged the European Union to reduce diesel emergency stockpiles in order to lower prices. The European Union has not disclosed the total amount of diesel stockpiles released by its member countries so far. However, the International Energy Agency stated that contributions from EU countries will mainly come in the form of refined diesel, rather than crude oil.
The crude oil reserves in the United States’ strategic oil reserve have dropped to less than 284 million barrels, the lowest level since 1982. U.S. President Donald Trump released a large amount of crude oil after starting the war with Iran, while former U.S. President Joe Biden conducted a large-scale release of oil during the Russo-U Ukrainian conflict in 2022.
Trump faces pressure to lower fuel prices before the mid-term elections in November, and his Republican party is striving to maintain a narrow majority in Congress during these elections. The retail price of gasoline at gas stations is about $4.45 per gallon, which has risen by nearly 50% since the war began at the end of February. Diesel prices have soared by about 70%, reaching a record level of around $6.50 per gallon.
The latest release may temporarily lower US strategic petroleum reserves to below the critical point at which extraction limitations take effect.
U.S. law stipulates that if the strategic oil reserve drops to less than 252.4 million barrels, the president cannot order routine minor cuts. However, the president can still order the release of oil in cases of major emergencies.
