After begging OPEC+ to pump out more oil (while cancelling pipelines domestically) to no avail, the Biden administration is turning to tapping the Strategic Petroleum Reserve after running out of ideas to lower gas prices.
According to CNBC:
Biden said Tuesday that the administration will tap the Strategic Petroleum Reserve as part of a global effort from energy-consuming nations to calm 2021′s rapid rise in fuel prices.
The coordinated release between the U.S., India, China, Japan, Republic of Korea and the United Kingdom is the first such move of its kind.
In total, the U.S. will release 50 million barrels from the SPR. Of the total 32 million barrels will be an exchange over the next several months, while 18 million barrels will be an acceleration of a previously authorized sale.
Today I'm announcing action to lower the cost of gas and oil for American families.
The Department of Energy will make available releases of 50 million barrels of oil from the Strategic Petroleum Reserve to lower gas and oil prices for Americans.
— President Biden (@POTUS) November 23, 2021
Tuesday’s announcement follows the administration saying for months that it was looking into the tools at its disposable as West Texas Intermediate crude futures surged to a seven-year high above $85.
Prices at the pump have followed the ascent, and are currently hovering around their highest level in seven years. The national average for a gallon of gas stood at $3.409 on Monday, according to AAA, up from $2.11 one year ago. Crude prices make up between 50% and 60% of what consumers pay to fill up their tanks, AAA said.
In March 2020, Trump ordered the purchase of 77 million barrels of U.S. produced crude oil for the reserve. Democrats like Senator Chuck Schumer opposed the move, and cut funding for it from Trump’s stimulus plan, claiming it was a “bailout for big oil.”
Reminder: When oil prices were in free-fall last year the Trump admin wanted to "fill up" the SPR. Senator Schumer called it a "bailout for big oil." Imagine today it feels like a missed buying opportunity… https://t.co/eTnAbfM3Pg @scunningha @AriNatter @jendlouhyhc
— annmarie hordern (@annmarie) November 22, 2021
Trump reacted to today’s news; “We were energy independent one year ago, now we are at the mercy of OPEC, gasoline is selling for $7 in parts of California, going up all over the Country, and they are taking oil from our Strategic Reserves. Is this any way to run a Country?”
The U.S. consumed an average of just over 18 million barrels of oil per day in 2020 – and the figure will obviously be higher this year, given the extent to which the pandemic depressed travel last year. In other words, the release of 50 million barrels isn’t even equal to three days worth of consumption. While it will certainly boost supply a bit, it’s questionable how much of an impact it will really make on oil prices, and for how long.
As Fox Business’ Phil Flynn notes, the policy could easily backfire and make the energy crisis worse in the long run. “If you try to use the SPR as a weapon it will backfire because it will only serve to artificially lower prices, thereby increasing demand making supplies tighter in the long run. Number two, it will discourage production in the new oil fields and thereby creating an even larger shortage down the road. It will also give OPEC more power because the left amount of oil in the global strategic petroleum reserve will be less.”
Matt Palumbo is the author of The Man Behind the Curtain: Inside the Secret Network of George Soros
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