President Biden ordered the release of 50 million barrels of oil from the U.S. Strategic Petroleum Reserve in a bid to combat the surging gas prices ahead of the holiday season, but the relief will take weeks to hit the market.
“American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand as the global economy emerges from the pandemic,” the White House announced in a statement Tuesday morning. “That’s why President Biden is using every tool available to him to work to lower prices and address the lack of supply.”
“Today, the President is announcing that the Department of Energy will make available releases of 50 million barrels of oil from the Strategic Petroleum Reserve to lower prices for Americans and address the mismatch between demand exiting the pandemic and supply,” the White House added.
Out of the release of 50 million barrels from the Strategic Petroleum Reserve (SPR), a total of 32 million barrels will be part of an exchange, designed just for a short-term boost to supply over the next several months. Under this plan, the Energy Department will trade barrels in December with buyers who will agree to send barrels back to the government sometime between 2022 to 2024 to replenish the reserve later.
The U.S. will immediately make 32 million barrels of oil currently stored in salt caverns along the Gulf Coast available “in response to the highest oil prices experienced in seven years,” the Energy Department said in its announcement of the release. The other 18 million barrels of the release “will be an acceleration into the next several months of a sale of oil that Congress had previously authorized.”
The reserve move will be in coordination with several other countries, including China, India, Japan, South Korea, and the United Kingdom, marking the first time a large group of countries is in tandem to also tap into their own strategic reserves in an effort on potentially lowering gas prices worldwide.
The SPR — a network of underground oil storage currently holds 604.5 million barrels of crude oil, spread across four sites. Emergency releases from the reserve usually occur after unforeseen disruptions to the oil supply. It takes 13 days after a presidential announcement for the oil to hit the market.
However, the White House statement doesn’t mention that Biden used an emergency authority in its decision to release oil from the reserve. Instead, the Biden administration opted to use a less-urgent authorization aimed to provide short-term fixes in getting more oil on the market, but the actual effect wouldn’t do much to alleviate the current problems.
According to a senior Biden administration official, the 50 million barrels of oil tapped from the reserve will not hit the U.S. market until “mid to late December, depending on market take-up.” The official also didn’t specify when consumers can expect to see lower prices at the gas pump, noting there is usually a delay between increased oil supplies and when one can see prices decline.
For weeks, Biden and his senior White House advisers have been weighing policy options in response to surging gas prices after facing political blowback in doing little to lower skyrocketing prices at the pump that are contributing to the biggest inflation surge in nearly three decades.
Gasoline prices had climbed steadily for months after Biden, in his very first action as president, waged war on American energy. With a stroke of a pen, Biden canceled the Keystone XL permit, forcing the U.S. to become once again dependent on the Middle East for crude oil.
The move to release from the SPR comes after Biden begged the Organization of the Petroleum Exporting Countries (OPEC+) earlier this month to increase production to ease shortages and lower prices, but the “oil cartel” defied his pleas.
House Democrats, led by Reps. Darren Soto of Florida and Ro Khanna of California urged Biden in a letter Monday to tap into the reserve and even ban crude oil exports in what they claim will “boost domestic supply and put downward pressure on prices for American families.”
However, the dramatic step of banning oil exports would backfire on U.S. consumers. Oil is a globally traded commodity, and Brent, the world benchmark, sets U.S. gas prices. If the world lost access to U.S. barrels, Brent prices would sharply rise due to less oil supply.
Last week, in taking additional actions that would result in no tangible or significant difference, Biden asked the heads of the Federal Trade Commission (FTC) to investigate the “mounting evidence of anti-consumer behavior by oil and gas companies,” claiming soaring gas prices while fuel costs declined.
Republicans blasted the move, noting Biden’s own policies provoked the rising costs at the pump with his war against America’s natural energy, arguing the “desperate attempts” would not fix the problem alone. Shortly after the announcement, former President Donald Trump slammed the move, calling it an “attack” on the Strategic Oil Reserves.
“Now I understand that Joe Biden will be announcing an ‘attack’ on the newly brimming Strategic Oil Reserves so that he could get the close to record-setting high oil prices artificially lowered. We were energy independent one year ago, now we are at the mercy of OPEC, gasoline is selling for $7 in parts of California, going up all over the country, and they are taking oil from our Strategic Reserves. Is this any way to run a Country?” Trump said in an email statement from his Save America PAC.
On Tuesday, the national average for a gallon of regular gas stood at $3.403 — the most expensive since October 2014, according to the American Automobile Association (AAA). In Florida, the average price is fifty cents lower than the national average at $3.351, while the average cost in New York is about twenty cents higher than the national price at $3.566.
Oil prices have climbed more than 60% this year alone. Last year at this time, the national average cost for a gallon of gas was $2.109, more than one dollar and thirty cents less than today’s national average price.
The announcement of the release did little to calm the oil market. West Texas Intermediate crude futures — the U.S. oil benchmark recovered Monday’s session low of $75.30 per barrel and rose higher to the positive territory, last traded 1.6% higher at almost $78 per barrel at the opening bell.