Newsman: The US President Joe Biden ordered the release of 1 million barrels of oil per day from the nation’s strategic petroleum reserve for about six months in an effort to drive down record oil prices in what he called a “wartime bridge. Biden said Thursday that he expects gasoline prices could drop “fairly significantly.”
President Biden also wants Congress to impose financial penalties on oil and gas companies that lease public lands but are not producing. He said he will invoke the Defense Production Act to encourage the mining of critical minerals for batteries in electric vehicles, part of a broader push to shift toward cleaner energy sources and reduce the use of fossil fuels. Biden issued a directive authorizing the use of the Defense Production Act to secure U.S. production of materials used in large capacity batteries, like those used in electric vehicles, including lithium, nickel, cobalt, graphite and manganese.
“By reducing our reliance on China and other countries for the minerals and materials that will power our clean energy future,” the White House said in a statement.
U.S. consumers have been hit with record gas prices as a result of disruptions to the oil market caused by the pandemic and the U.S. ban on Russian oil imports following its invasion of Ukraine. The surge in prices has helped push inflation to its highest point in decades, with oil prices affecting everything from the cost of plastics to food.
This is the second time that the Biden administration releasing country’s strategic oil reserves. President Biden announced the first time release of 50 million barrels from the strategic reserve in coordination with other countries in November. The reserve has a storage capacity of 714 million barrels stored in “huge underground salt caverns at four sites along the coastline of the Gulf of Mexico,” according to the Department of Energy.
On Thursday, President Biden said it was not known how much gasoline prices could decline as a result of his move, but he suggested it might be “anything from 10 cents to 35 cents a gallon.” Nationwide, gas is averaging about $4.23 a gallon, compared with $2.87 a year ago, according to the American Automobile Assn.
“I know how much it hurts, as you’ve heard me say before, I grew up in a family like many of you, where when the price of a gallon gasoline went up it was discussion at the kitchen table,” Biden said. “Our family budgets, your family budgets to fill a tank, none of it should hinge on whether a dictator declares war.”
“The bottom line is if we want lower gas prices we need to have more oil supply right now,” Biden said. “This is a moment of consequence and peril for the world, and pain at the pump for American families.”
“I say enough, enough of lavishing excessive profits on investors and payouts and buybacks,” Biden said. “The American people are watching, the world is watching U.S. oil companies.”
“Those sitting on unused leases and idle wells will either have to start producing or pay the price for their inaction,” Biden said.
“As I said from the start, Putin’s war is imposing a cost on Americans, our allies and democracies around the world,” Biden said.
Energy prices in US have spiked after the United States and allies imposed steep sanctions on Russia. The U.S. consumes about 21 million barrels of oil daily, more than 7 billion barrels of oil a year with about 4 0% in the form of gasoline, according to the U.S. Energy Information Administration.
The U.S. is producing an average of 11.7 million barrels daily, down from 13 million barrels a day in early 2020.Domestic oil production is equal to more than half the country’s usage, but high prices have not led companies to return to their pre-pandemic levels of output.
In his remarks Thursday, Biden tried to shame oil companies that he said are focused on profits instead of putting out more barrels, saying that adding to the oil supply was a patriotic obligation.
“This is not the time to sit on record profits: It’s time to step up for the good of your country,” the president said.
Biden’s move could release up to 180 million barrels of oil, the largest discharge of U.S. reserves in history, with the first barrels coming on the market in May’ 2022.
The planned release is a way to increase supplies as a bridge until oil companies’ ramp up their own production, with administration officials estimating that domestic production will grow by 1 million barrels daily this year and an additional 700,000 barrels daily in 2023.
The markets reacted quickly, with crude oil prices dropping more than 3% on Thursday morning to roughly $104 a barrel. Still, oil is up from roughly $60 a year ago, with supplies failing to keep up with demand as the world economy has begun to rebound from the COVID-19 pandemic.
The administration says increasing oil output is a gradual process and the release would provide time to ramp up production. It also wants to incentivize greater production by putting fees on unused leases on government lands, something that would require congressional approval.
Oil producers have been more focused on meeting the needs of investors than consumers, according to a survey released last week by the Dallas Federal Reserve. About 59% of the executives surveyed said investor pressure to preserve “capital discipline” amid high prices was the reason they weren’t pumping more, while fewer than 10% blamed government regulation.
The steady release from the reserves would almost close the domestic production gap relative to February 2020, before the coronavirus caused a steep decline in oil output.
The Biden administration in November announced the release of 50 million barrels from the strategic reserve in coordination with other countries. And after the Russia-Ukraine war began, the U.S. and 30 other countries agreed to an additional release of 60 million barrels from reserves, with half the total coming from the U.S.
According to the Department of Energy, which manages it, more than 568 million barrels of oil were held in the reserve as of March 25.
News of the administration’s planning was first reported by Bloomberg.
