Mar 16, 2020 - Energy & Environment

The hurdles facing Trump's planned strategic oil purchase

Donald Trump

Photo: Doug Mills-Pool/Getty Images

The first White House coronavirus policy response aimed specifically at the reeling U.S. oil sector may not be a sure thing to occur as President Trump envisions.

What's happening: Late Friday afternoon Trump said the U.S. would purchase enough crude oil to fill the Strategic Petroleum Reserve "right up to the top," which would ultimately be a $2.6 billion purchase if oil remained at Friday's prices.

  • That would involve a plan to purchase 78 million barrels, given that the reserve has a capacity of 713.5 million barrels and currently holds around 635 million.

Where it stands: The Energy Department said Friday it would "immediately initiate an expedited process" to begin purchasing oil.

But, but, but: The research firm ClearView Energy Partners notes that "funding remains unclear" and sees "political headwinds" in Congress to appropriating new money.

  • However, their weekend note added that the administration could gain congressional permission to reallocate existing funds for some of the purchases. S&P Global Platts has more on that here.

What they're saying: Oil analyst Bob McNally, president of Rapidan Energy Group, tells the Washington Post that buying oil at low prices for the stockpile is a good idea.

  • McNally, a former energy official in the President George W. Bush era, notes that "our economy remains vulnerable to supply disruptions anywhere in the world."

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