After releasing the most oil ever from the U.S. emergency petroleum reserve, the Biden administration is signaling it will refill soon, a multibillion-dollar undertaking that it hopes will rouse sluggish domestic drilling activity.
The pitch is likely to be a hard sell for many domestic producers, say industry executives and analysts. “It’s a little bit more [complex] than this,” said Olivier Le Peuch, chief executive of oil-field services company Schlumberger Ltd.
On Wednesday, President Biden said for the first time that the Energy Department would begin purchasing oil to refill the U.S. Strategic Petroleum Reserve when oil prices are $67 to $72 per barrel, or less. Officials also said the department has made a final rule that would allow it to purchase crude at a fixed future price, which they hope would encourage producers to drill more.
Energy executives and analysts expressed doubts the plan would spur a large increase in production in the short term. Many oil companies are wary of locking in sales when commodity markets have swung wildly. They hope to capture high oil prices while they are in place. Rising drilling costs and pressure from investors to limit production and return excess cash to shareholders are also dimming the outlook for production growth, they said.
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