The Department of Energy (DOE) has announced the cancellation of its plans to purchase millions of barrels of oil in order to refill the depleted U.S. Strategic Petroleum Reserve (SPR). This decision comes as oil prices skyrocket to a five-month high, reaching nearly $90 per barrel for Brent crude and slightly above $85 per barrel for West Texas Intermediate.

The Energy Department cited the need to prioritize taxpayer interests as the main reason for canceling the SPR purchase. The buyback plan was originally intended to refill the depleted reserves as long as oil prices remained below $79 per barrel. However, the recent surge in prices has prompted the DOE to reconsider its strategy.

The Bayou Choctaw SPR site, among other SPR caverns along the U.S. Gulf Coast, remains at historically low levels after President Joe Biden's 180 million-barrel drawdown in March 2022. This drawdown aimed to stabilize energy costs for consumers in the wake of Russia's invasion of Ukraine. While it successfully alleviated prices for consumers, concerns have been raised about the U.S. potentially being vulnerable and resource-strapped in the event of an emergency due to the extensive depletion.

The cancellation of the Bayou Choctaw purchase could place the Biden administration off track in its goal of fully replenishing the SPR by the end of the year. The Energy Department has struggled to refill the emergency stockpile within the specified timeline and price points. Initially targeting oil prices between $67 to $72 per barrel, the department later raised the threshold to $79 per barrel. However, in their most recent refill last month, the DOE exceeded those prices and spent an average of $81 per barrel.

Currently, the SPR stands at approximately 363 million barrels, a significant decrease from the 600 million barrels recorded at the beginning of 2022. The DOE stated that it will continue to monitor market dynamics and solicit available capacity as the situation allows for future purchases. The goal is to remain flexible and innovative in protecting this critical national security asset.

Overall, the decision by the Department of Energy to cancel the plans for refilling the Strategic Petroleum Reserve reflects the challenges posed by the recent surge in oil prices. As market conditions fluctuate, the DOE will reassess its approach to ensure the sustainable replenishment of this vital resource.