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U.S. DOE to Purchase Crude from Small to Midsize Producers

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In the wake of crude oil price’s
recent plunge, the United States Department of Energy (“DOE”) has announced
that it will fill the Strategic
Petroleum Reserve (“SPR”) to its maximum capacity by purchasing 77 million
barrels of American-made crude oil.  The
DOE’s announcement can be found here.  

The initial solicitation is for the purchase of 30 million
barrels by confidential Request for Proposal (“RFP”) and can be found at: https://www.spr.doe.gov/doeec/OilPurchase.htm.
The focus of this initial crude oil RFP is small to midsize domestic oil
producers – throwing a lifeline to those who have been hit especially hard by
the price drop. 

According to the DOE’s announcement,
“the [DOE] is working with
Congress to finalize the funding to support the purchase of the full 77 million
barrels of oil, consistent with the President’s directive.”  With regard to delivery, the announcement recognizes that the private sector needs time to plan for
delivery logistics, so the solicitation is for crude oil to be delivered in May
and June; although, early April deliveries are encouraged.

The
purchase is sure to be controversial – as discussed in an article in The Hill
entitled, “Trump administration prepares to
buy 30M barrels of oil amid industry slump
.”  However, the reality of the far-reaching
benefits of the oil purchase cannot be overlooked, as oil and gas industry
employees impact so many other service sectors in the nation.  Further, targeting small and midsize
producers for the initial RFP will provide crucial relief for these companies
who are the lifeblood of the oil and gas industry, but who may not have the
financial wherewithal to weather oil prices below $30 per barrel for long.

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