By JOSH BOAK and COLLEEN LONG
WASHINGTON (AP) — President Joe Biden on Tuesday ordered a record 50 million barrels of oil released from America’s strategic save, aiming to bring down gasoline and other costs, in coordination with other major energy consuming nations including India, the United Kingdom and China.
The U.S. action is focused on helping Americans coping with higher fuel and other prices ahead of Thanksgiving and winter holiday travel. Gasoline prices are at about $3.40 a 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 at the White House. “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 trading after the announcement, prices shot up approximately 2% 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 permanent,” Galimberti said. “So once it is stopped, then if need continues to be above supply like it is right now, then you’re back to square one.”
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, and U.S. officials said it’s the biggest coordinated release from global strategic reserves.
British chief Minister Boris Johnson’s spokesman, Max Blain, said it was “a sensible and measured step to sustain global markets” during the pandemic recovery. Blain additional that the country’s companies will be empowered but not forced to participate in the release.
Despite all the optimistic statements, the actions by the U.S. and others risk counter moves by Gulf nations, especially Saudi Arabia, 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 information spread in recent days 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 inner issue is restrictions on domestic production by the administration.
“Begging OPEC and Russia to increase production and now using the Strategic Petroleum save are desperate attempts to address a Biden-caused disaster,” Barrasso said. “They’re not substitutes for American energy production.”
Biden has scrambled to reshape much of his economic agenda around the issue of inflation, saying that his recently passed $1 trillion infrastructure package will reduce price pressures by making it more efficient and cheaper to transport goods.
Republican lawmakers have hammered the administration for inflation hitting a 31-year high in October. The consumer price index has soared 6.2% from a year ago — the biggest 12-month jump since 1990.
The Strategic Petroleum save is an emergency stockpile to preserve access to oil in case of natural disasters, national security issues and other events. Maintained by the Energy Department, the reserves are stored in caverns produced in salt domes along the Texas and Louisiana Gulf Coasts. There are approximately 605 million barrels of petroleum in the save.
The Biden administration argues that it is the right tool to help ease the supply problem. Americans used an average of 20.7 million barrels a day during September, according to the Energy Information Administration. That method that the release equals about two-and-a-half days of additional supply.
“Right now, I will do what needs to be done to reduce the price you pay at the pump,” Biden said at the White House.
He said the administration also is looking into possible price gouging by gas companies squeezing customers while making money off the lowered oil costs. Energy Secretary Jennifer Granholm, too, said U.S. companies are part of the problem, keeping production below prepandemic levels in order to increase profits.
The coronavirus pandemic roiled energy markets everywhere. As it bore down and economic activity sank in April of last year, energy need collapsed and oil futures prices turned negative. Energy traders did not want to get stuck with crude that they could not store. But as the economy recovered, production lagged and prices jumped to a seven-year high in October.
U.S. production has not recovered. Energy Information Administration figures indicate that domestic production is averaging approximately 11 million barrels daily, down from 12.8 million before the pandemic.
Americans are feeling the squeeze. For Matt Hebard of Agoura Hills, Calif., it’s taking $80 to gas up his SUV. “Gas prices are definitely on everyone’s minds right now,” he said as he filled up at a stop in his suburb northwest of Los Angeles.
He hoped the president’s move has a good long-term effect.
Sy Amber, meanwhile, was en route to Las Vegas from his California home. Unhappily spending more money filling up his car, he said he didn’t expect Biden’s action to work and didn’t agree with them.
“I’m not happy with our president,” he said.
Republicans in Congress are pointing to Biden’s efforts to minimize drilling and sustain replaceable energy as a reason for the decreased production, though there are multiple market dynamics at play as fossil fuel prices are higher around the world.
Biden and administration officials insist that tapping more oil from the save does not conflict with his climate goals, because this short-term fix meets a specific problem, while climate policies are a long-term answer over decades.
They argue that the administration’s push to raise replaceable energy will ultimately average less dependence in the U.S. on fossil fuels. But that’s a politically functional argument — in simple terms, higher prices reduce usage, and considerably higher gasoline prices could force Americans into less reliance on fossil fuels.
The White House decision came after weeks of diplomatic negotiations. Biden and President Xi Jinping of China talked over steps to counter tight petroleum supplies in their virtual meeting earlier this month and “discussed the importance of taking measures to address global energy supplies,” according to the White House.
The Department of Energy will make the oil obtainable from the Strategic Petroleum save in two ways; 32 million barrels will be released in the next few months and will return to the save in the years ahead, the White House said. An additional 18 million barrels will be part of a sale of oil that Congress empowered.
AP writers Cathy Bussewitz and Charles Sheehan contributed from New York, Jill Lawless from London and Matthew Daly and Ellen Knickmeyer from Washington.
Click: See details