President Biden is withdrawing an additional 15 million barrels from US contingency reserves – and “stands ready to authorize additional sales in the coming months as needed.”
The White House announced on Tuesday that the Department of Energy will ship more crude oil from the Strategic Petroleum Reserve (SPR) to the market in December to lower prices at the pump.
The White House press release added the Biden administration has plans to replenish the SPR once prices fall, after receiving backlash from some pundits for emptying America’s “oil piggy bank” — the one for emergency use during established during an oil supply or economic crisis.
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Using the SPR to lower gas prices
With the addition of those 15 million barrels, Biden will complete his plan to unleash a total of 180 million barrels — something he pledged to do in the early days of the Russian war in Ukraine.
The White House announcement comes just weeks after the President announced that he intends to release 10 million barrels from the SPR in November. The move came primarily in response to plans by the Organization of the Petroleum Exporting Countries (OPEC+) to cut oil production by 2 million barrels a day.
But even before OPEC+ news was released, gas prices were starting to rise again after a 98-day streak of lower prices over the summer.
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By selling more crude from reserves, Biden hopes to drive prices back down. He also calls on energy companies to do their part by investing in production and passing their savings on to consumers.
As earnings for the top six publicly traded oil companies surpassed $70 billion in the second quarter of this year, Biden noted that those companies spent $20 billion on share buybacks.
“My message to American energy companies is that you shouldn’t use your profits to buy back shares or pay dividends. Not now. Not while a war is raging,” the president said in a news conference on Wednesday.
“They should use these record-breaking gains to increase production and refining.”
Will Biden’s new plan support long-term stability?
That decision raised some concerns – the depletion of emergency oil reserves could put the country at risk in the future if global or domestic oil supplies ever drop to dangerously low levels.
However, the Biden administration claims that the SPR is still the largest strategic reserve in the entire world. It has about 400 million barrels left, which Biden says is “more than enough for any supply emergency.”
However, the US consumed nearly 20 million barrels per day in 2021 – meaning the reserve is only being domestically supplied for about 20 days.
Biden says he plans to buy back supplies if prices fall to or below $67 to $72 a barrel, citing this as a win for both taxpayers and energy security. The Department of Energy is also in the process of finalizing a rule that will one day allow it to enter into fixed-price contracts through a competitive auction process for oil to be delivered to the SPR.
Biden says this strategy “will protect taxpayers and help provide certainty about future demand for crude.”
US crude is currently around $88 a barrel, with gas prices averaging $3.83 a gallon nationwide.
Some experts remain skeptical that these efforts will significantly impact gas prices. Prices may have skyrocketed lately due to refinery problems, but CNN reports that lower demand and cheaper gas mixes needed in the winter — plus a likely recession — could alone bring down gas prices.
Mike Sommers, President and CEO of the American Petroleum Institute, also criticized Biden’s decision in a statement Wednesday: “At a time when American energy can be a stabilizing force both at home and abroad, we advise caution as we continue to pursue our strategy.” rely on short-term efforts, which are not substitutes for sound long-term policies that enable America’s energy leadership.
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