§ 626.6 - Acquiring petroleum products by purchase.

§ 626.6 Acquiring oil petroleum products by direct purchase.

(a) General. For the direct purchase of crude oilpetroleum products, DOE shall, through certified contracting officers, conduct crude oil petroleum product acquisitions in accordance with the competitive principles of the FAR and the DEAR.

(b) Acquisition strategy.

(1) DOE solicitations:

(i) May be either continuously open or fixed for a period of time (usually no longer than 6 months); and

(ii) May provide either for prompt immediate delivery or for delivery at future dates.

(2) DOE may alter the acquisition plan to take advantage of differentials in prices for different qualities of oilpetroleum products, based on a consideration of factors, including the availability of storage capacity in the SPR sites, the logistics of changing delivery streams, and the availability of ships, pipelines, and terminals to move and receive the oilpetroleum products.

(3) Based on the market analysis described in paragraph (d) of this section, DOE may refuse offers or suspend the acquisition process on the basis of Government estimates that project projecting substantially lower oil petroleum product prices in the future than those contained in offers. If DOE determines there is a high probability that the cost to the Government can be reduced without significantly affecting national energy security goals, DOE may either contract for delivery at a future date or delay purchases to take advantage of the projected lower future lower prices. Conversely, DOE may increase the rate of purchases if prices fall below recent price trends or futures markets present a significant contango and prices offer the opportunity to reduce the average cost of oil petroleum product acquisitions in anticipation of higher future prices.

(4) Based on the market analysis described in paragraph (d) of this section, DOE may refuse offers, decrease the rate of purchase, or suspend the acquisition process if DOE determines acquisition will add significant upward pressure to prices either regionally or on a world-wide basis. DOE may consider recent price changes, private inventory levels, oil petroleum product acquisition by other stockpiling entities, the outlook for world oil petroleum products production, incipient disruptions of supply or refining capability, logistical problems for moving petroleum products, macroeconomic factors, and any other considerations that may be pertinent to the balance of petroleum product supply and demand.

(c) Fill requirements determination. DOE shall develop SPR fill requirements for each solicitation based on an assessment of national energy security goals, the availability of storage capacity, and the need for specific grades and quantities of crude oilpetroleum products.

(d) Market analysis.

(1) DOE shall establish a market value for each crude type petroleum product to be acquired based on a market analysis at the time of contract award.

(2) In conducting the market analysis, DOE may use consider prices on futures markets, spot markets, recent price movements, current and projected shipping rates, forecasts by the DOE Energy Information Administration, and any other analytic tools available to DOE to determine the most desirable purchase profile.

(3) A market analysis DOE may also consider factors including recent price changes, private inventory levels, oil petroleum product acquisition by other stockpiling entities, the outlook for world oil petroleum product production, incipient disruptions of supply or refining capability, logistical problems for moving petroleum products, macroeconomic factors, and any other considerations that may be pertinent relevant to the balance of petroleum product supply and demand.

(e) Evaluation of offers.

(1) DOE shall evaluate offers using:

(i) The criteria and requirements stated in the solicitation; and

(ii) The market analysis under paragraph (d) of this section.

(2) DOE shall require financial guarantees from contractorsthe contracting entity, in the form of a letter of credit or equivalent financial assurance.