Fight against gas prices, the United States will release 50 million barrels of oil
US President Joe Biden on Tuesday ordered 50 million barrels of oil from the US Strategic Reserve to help reduce energy costs, in coordination with other major energy-consuming countries, including China, India and the Kingdom -United.
The move targets global energy markets, but also American voters who face higher inflation and rising prices ahead of Thanksgiving and the winter holidays. The price of gasoline is around US $ 3.40 per gallon, more than 50% more than a year ago, according to the American Automobile Association.
The government will start putting barrels on the market from mid-December to the end of December.
But the action is unlikely to immediately push gas prices down significantly as families begin to travel for the holidays. Gasoline generally responds with a lag to changes in oil prices, and administration officials have suggested that this is one of many steps towards cutting costs.
There was no major impact on the price of a benchmark barrel of US crude immediately after the announcement. Prices have gone up and down all month and are up less than 1% so far during this shortened holiday week.
The actions of the United States and others are also likely to counter the measures taken by the Gulf countries, especially Saudi Arabia, and Russia. Saudi Arabia and other Gulf countries have made it clear that they intend to control supply to keep prices high for now.
As word has spread in recent days of an upcoming joint release of reserves by the United States and other countries, OPEC interests have warned those countries may respond in turn, reneging on their promises. to increase supplies in the coming months.
Biden was quick to reshape much of his economic agenda around the issue of inflation, saying his recently passed $ 1 trillion infrastructure package will reduce pricing pressures by making freight transportation more efficient and less expensive.
Republican lawmakers hammered the administration so that inflation peaked in 31 years in October. The Consumer Price Index climbed 6.2% from a year ago, the biggest 12-month jump since 1990.
Republican Senate Leader Mitch McConnell burst into the White House in a floor speech last week, claiming the victims of the price hike were middle-class Americans.
“The three main drivers of the staggering 6.2% inflation rate we recorded last month were housing, transportation and food,” the Kentucky senator said. “These are not luxury goods, they are essentials, and they occupy a much larger share of the budgets of families from the middle class to the bottom.
The Strategic Oil Reserve is an emergency stockpile to preserve access to oil in the event of natural disasters, national security concerns and other events. Maintained by the Department of Energy, the reserves are stored in caves created in salt domes along the Gulf coasts of Texas and Louisiana. There are approximately 605 million barrels of sweet and sour oil on the reserve.
“As we emerge from an unprecedented global economic crisis, the supply of oil has not kept up with the demand, forcing working families and businesses to pay the price,” the Energy Secretary said Jennifer Granholm in a statement. “This action underscores the president’s commitment to use the tools available to reduce costs for working families and continue our economic recovery.”
The Biden administration has argued that the reserve is the right tool to help alleviate the supply problem. Americans used an average of 20.7 million barrels a day in September, according to the Energy Information Administration. This means that the release almost equates to about two and a half days of additional supply.
The pandemic has turned energy markets – like everything else – out of whack on several fronts. When the closures began in April 2020, demand collapsed and oil futures prices turned negative. Energy traders didn’t want to end up with crude they couldn’t store. But as the economy recovered, prices hit a seven-year high in October.
American production has not recovered. Figures from the Energy Information Administration indicate that national production averages around 11 million barrels per day, up from 12.8 million before the start of the pandemic.
Republicans have also taken advantage of Biden’s efforts to minimize drilling and support renewables as the reason for the decline in production, although there are multiple market dynamics at play as fossil fuel prices are higher in the world. world.
Meanwhile, Biden and administration officials insist that drawing more oil from the reserve is not at odds with the president’s long-term climate goals, as it is a solution to short term to solve a specific problem, while climate policies are a long term response. through the decades.
They argue that because they push to boost renewables, the United States will ultimately be less dependent on fossil fuels. But it’s a politically practical argument – put simply, higher prices reduce usage, and significantly higher gasoline prices could force Americans to rely less on fossil fuels.
The White House decision comes after weeks of diplomatic negotiations. Biden and Chinese President Xi Jinping discussed measures to address limited oil supplies at their virtual meeting earlier this month, when the two “discussed the importance of taking action to meet global energy supplies. “, according to the record of the White House conversation.
Japan and South Korea are also participating. Administration officials say this is the largest coordinated release of global strategic reserves.
The US Department of Energy will make oil available from the Strategic Oil Reserve in two ways; 32 million barrels will be released in the coming months and will return to the reserve in the years to come, the White House said. An additional 18 million barrels will be part of an oil sale that Congress previously authorized.
White House press secretary Jen Psaki said Monday evening that the White House would also keep an eye on oil companies.
“We will continue to put pressure on the oil companies that have made record profits and watch what we see as lower prices there when there is a supply of oil or the price of oil goes down and the price goes down. gas is not going down, ”Psaki says. “It doesn’t take an expert in economics to know this is a problem.
AP writer Charles Sheehan contributed from New York. Matthew Daly and Ellen Knickmeyer contributed Washington.