The U.S. government is slated to sell $375 million worth of crude oil from the country's emergency reserve this winter after Congress passed a temporary spending bill on Friday that contained a measure authorizing the sale.
President Barack Obama's administration has pushed Congress to approve an up to $2 billion plan for a revamp of the Strategic Petroleum Reserve, a string of heavily guarded underground salt caverns along the Gulf of Mexico filled with crude. The stash currently holds about 695 million barrels of oil.
A Department of Energy spokeswoman said authorization in the spending bill "will allow the Department to take necessary steps to increase the integrity and extend the life" of the reserve.
Congress passed the original funding for the reserve after the 1973 to 1974 Arab oil embargo to protect the country from global supply disruptions that have the potential to spike domestic fuel prices and damage the U.S. economy.
Many of the reserve's steel tanks and pumps are now rusting after decades of being whipped by storms and exposed to salt air. A plan submitted to Congress by the Energy Department in September said "this equipment today is near, at, or beyond the end of its design life."
In addition, the U.S. oil boom of the last decade has reversed the direction of many pipelines away from the reserve, making it more difficult to get oil to market in a hurry.
The $375 million sale, or nearly 7.3 million barrels of oil in today's price, is just the first planned installment. For each of the next three fiscal years Congress would have to approve the annual sales to reach the up to $2 billion revamp plan. It remains to be seen whether President-elect Donald Trump would urge Congress for the annual authorizations in the coming years.
This sale, which could take place seven to nine weeks after the temporary spending bill is enacted, would pay for the design of the revamp of the SPR and other pre-construction costs. Further sales would pay for construction of new equipment and new marine terminals to allow the reserve greater capacity to ship oil by vessels.
(Reporting by Timothy Gardner)