Comparison of Strategic Petroleum Reserve Oil Prices and Commercial Oil Prices

Pursuant to a congressional request, GAO investigated the reasons for the apparent excessively high prices paid by the Government for oil purchased abroad for the Strategic Petroleum Reserve (SPR). It also examined whether increased Government oil purchases from Western Hemisphere countries could reduce oil acquisition costs.

In comparing the prices that the government paid for SPR oil during 1981 and 1982 with the average prices paid by oil companies for comparable amounts, GAO found that the government paid from $0.06 to $0.16 per barrel more than the oil companies. The SPR oil was acquired through both long-term contracts and purchases on the spot market; for oil bought through contracts, the government paid less per barrel than the average contract prices reported by oil companies. For oil bought on the spot market, the government paid more than the average oil company, but much of this added cost occurred in the first 2 months that government spot-market purchases were made. Overall, the government has reduced SPR oil acquisition costs by buying oil on the spot market, which generally has lower prices than the long-term market. Regarding the purchase of oil from Western Hemisphere countries, GAO found that much of the Canadian and Venezuelan crude oil has not met SPR minimum quality specifications. However, Mexico is the largest source of oil for the SPR, and the Department of Energy can continue to save money by buying Mexican crude oil.