A record-setting 50 million barrels of oil were ordered for release from reserves by President Joe Biden on Tuesday. These barrels come from America’s strategic reserve and are meant to help lower rising energy costs.
The action is mainly aimed at global energy markets but also helps Americans cope with inflation and skyrocketing prices just before the holiday travel season.
According to the American Automobile Association, the average price of gasoline is about $3.40 a gallon right now in the U.S., more than a 50% increase in price from a year ago.
The government will begin moving barrels into the market in mid-to-late December.
“While our combined actions will not solve the problems of high gas prices overnight, it will make a difference,” Biden said. “It will take time, but before long, you should see the price of gas drop where you fill up your tank.”
Just before Biden announced his intent to release the 50 million barrels, oil prices had dropped, a sign that investors were anticipating these moves, which could bring 70-80 million barrels of oil onto global markets. Unfortunately, prices went up rather than fell in Tuesday morning trading.
After the U.S. made its announcement, India said it would release 5 million barrels from its reserves, and the British government confirmed it would release 1.5 million barrels. Japan and South Korea are also working in conjunction with these countries.
These actions by the U.S. and others also risk eliciting counter moves from nations like Saudi Arabia and Russia. Saudi Arabia and other Gulf nations have previously made it clear that they intend to keep prices high for the time being in order to control supply.
As word spread of a coming joint release from the U.S. and other countries, OPEC interests warned that Gulf nations or Russia could respond by reneging on promises to increase supplies in coming months.
Among those who criticized Biden’s announcement was Wyoming Senator John Barrasso.
“Begging OPEC and Russia to increase production and now using the Strategic Petroleum reserve are desperate attempts to address a Biden-caused disaster,” said Barrasso. “They’re not substitutes for American energy production.”
Republican lawmakers have come down on the Biden administration for hitting a 31-year inflation high in October. The U.S. saw its biggest 12-month jump in the consumer price index since 1990, soaring 6.2% from last year.
The Biden administration argues that utilizing some of the U.S. reserves is the best option to help the supply problem.
Statistics from the Energy Information Administration say Americans used an average of 20.7 million barrels of oil a day during the month of September. This means that the 50-million-barrel release only amounts to about two-and-a-half days of additional oil supply.
“Right now, I will do what needs to be done to reduce the price you pay at the pump,” said Biden. “From the middle class and working families that are spending much too much and it’s a strain; you’re the reason I was sent here to look out for you.”
The Department of Energy plans to make the oil from the reserve available in two ways. In the next few months, 32 million barrels will be released and returned to the reserve in the year ahead. The other eighteen million barrels are for an oil sale authorized by Congress.
