U.S. taps oil reserve to ease pain at the pump
Gas prices are more than 50 percent higher than one year ago
President Joe Biden on Tuesday ordered a record-setting 50 million barrels of oil released from America’s strategic reserve to help bring down energy costs, in coordination with other major energy consuming nations, including India, the United Kingdom and China.
The U.S. action is aimed at global energy markets, but also at helping Americans coping with higher inflation and rising prices ahead of Thanksgiving and winter holiday travel. Gasoline prices are at about $3.40 a gallon, more than 50 percent 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 time, but before long you should see the price of gas drop where you fill up your tank.”
The government will begin to move barrels into the market in mid- to late-december. Gasoline usually responds at a lag to changes in oil prices, and administration officials suggested this is one of several steps toward ultimately bringing down costs.
Oil prices had dropped in the days ahead of the announced withdrawals, a sign that investors were anticipating the moves that could bring a combined 70 million to 80 million barrels of oil onto global markets. But in Tuesday morning trading, prices shot up nearly 2 percent instead of falling.
The market was expecting the news, and traders may have been underwhelmed when they saw the details, said Claudio Galimberti,
senior vice president for oil markets at Rystad Energy.
“The problem is that everybody knows that this measure is temporary,” Galimberti said.
Shortly after the U.S. announcement, India said it would
release 5 million barrels from its strategic reserves. The British government confirmed it will release up to 1.5 million barrels from its stockpile. Japan and South Korea are also participating.
The actions by the U.S. and others also risk counter moves by Gulf nations and by Russia. Saudi Arabia and other Gulf countries have made clear they intend to control supply to keep prices high for the time being.
As word spread of a coming joint release from U.S. and other countries’ reserves, there were warnings from OPEC interests that those countries may respond in turn, reneging on promises to increase supplies in coming months.
Wyoming Sen. John Barrasso was among Republicans who criticized Biden’s announcement. The No. 3 Senate Republican said the underlying issue is restrictions on domestic production by the Biden administration.
“Begging OPEC and Russia to increase production and now using the Strategic Petroleum Reserve are desperate attempts to address a Biden-caused disaster,” Barrasso said. “They’re not substitutes for American energy production.”