What are deferrals and premium barrels?
The Department of Energy has occasionally agreed to delays in scheduled deliveries to the SPR due to tight markets or disruptions in the marketplace that lead to, or contribute to, a backwardated market, i.e., prices in the future are lower than current prices. Deferrals are a means of acquiring oil for the SPR at no cost to the taxpayer. Deferrals are requested by the contractor and, if agreed to by the Department of Energy, are negotiated to provide premium barrels (similar to interest) to the SPR, along with the contracted volumes, at a later date. Both the contractor and the Government benefit from the arrangement.
