By Josh Boak and Colleen Long, The Associated Press November 23, 2021.
WASHINGTON (AP) – President Joe Biden on Tuesday ordered 50 million barrels of oil from the U.S. Strategic Reserve to help cut energy costs, in coordination with other major energy-consuming countries, including India, the UK and China.
The US action is aimed at global energy markets, but also to help Americans cope with higher inflation and rising prices before Thanksgiving and the winter holidays. Gasoline prices are around $ 3.40 per gallon, more than 50% higher than a year ago, according to the American Automobile Association.
“While our combined actions will not solve the problems of high gas prices overnight, it will make a difference”? ? Biden promised in remarks. “It will take a while, but before long you should see gas prices drop where you fill up.” ??
The government will start putting barrels on the market from mid-December to the end of December. 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.
Oil prices had fallen in the days before the announced withdrawals, a sign that investors were anticipating movements that could bring 70 to 80 million barrels of oil on world markets. But in Tuesday morning trading, prices climbed nearly 2% instead of falling.
The market was expecting the news, and traders may have been disappointed when they saw the details, said Claudio Galimberti, senior vice president of oil markets at Rystad Energy.
“The problem is that everyone knows that this measure is temporary” ?? said Galimberti. “So once it is stopped, then if the demand continues to be greater than the supply as it is now, then you are back to square one.” ??
Shortly after the US announcement, India announced that it would release 5 million barrels from its strategic reserves. The UK government has confirmed it will release up to 1.5 million barrels from its stockpile. Japan and South Korea are also participating. US officials say this is the largest coordinated release of global strategic reserves.
Prime Minister Boris Johnson’s spokesman Max Blain said it was “a sensible and measured move to support global markets” ?? during the pandemic recovery. Blain added that UK companies will be allowed but not required to participate in the publication.
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.
Wyoming Senator John Barrasso was among Republicans who criticized Biden’s announcement. Senate Republican No.3 said the underlying problem was restrictions on domestic production by the Biden administration.
“Asking OPEC and Russia to increase production and now use the strategic oil reserve are desperate attempts to deal with a disaster caused by Biden”? ? Barrasso said. “They do not replace American energy production. “??
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.
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 oil in the reserve.
The Biden administration maintains that the reserve is the right tool to help alleviate the supply problem. Americans used an average of 20.7 million barrels per 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.
“For now, I will do what needs to be done to lower the price you pay at the pump,” Biden said. “Middle class and working families spending way too much and it’s a strain… you are the reason I was sent here to watch over you. “??
Biden said the White House is investigating a possible price hike by gas companies that are squeezing customers while making money from falling oil costs.
The coronavirus pandemic has shaken energy markets. 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.
Biden and administration officials insist that drawing more oil from the reserve does not conflict with the president’s long-term climate goals, as this short-term solution addresses a specific problem, while climate policies are a long-term response spanning decades.
They argue that the administration’s push to boost renewables will ultimately mean less dependence in the United States on fossil fuels. But it’s a politically convenient argument – put simply, higher prices reduce usage, and significantly higher gasoline prices could force Americans to rely less on fossil fuels.
“The only long-term solution to rising gas prices is to continue our march to eliminate our dependence on fossil fuels and create a robust green energy economy”? ? Democratic Senate Leader Chuck Schumer said he was in favor of the release.
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 and “discussed the importance of taking action to meet global energy supplies.” ?? according to the White House.
The 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 authorized by Congress.
Contributed AP writers Cathy Bussewitz and Charles Sheehan from New York, Jill Lawless from London, and Matthew Daly and Ellen Knickmeyer from Washington.