WASHINGTON — President Joe Biden on Tuesday ordered 50 million barrels of oil released from America's strategic reserve to help bring down energy costs, in coordination with other major energy consuming nations, including India, the United Kingdom and China.
The U.S. action is aimed at global energy markets, but also at helping Americans coping with higher inflation and rising 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. “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 Tuesday morning trading, prices shot up nearly 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 temporary,” Galimberti said. “So once it is stopped, then if demand 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. U.S. officials say it’s the biggest coordinated release from global strategic reserves.
Prime Minister Boris Johnson’s spokesman, Max Blain, said it was “a sensible and measured step to support global markets” during the pandemic recovery. Blain added that British companies will be authorized but not compelled to participate in the release.
The actions by the U.S. and others also 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 word 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 underlying issue is restrictions on domestic production by the Biden administration.
“Begging OPEC and Russia to increase production and now using the Strategic Petroleum Reserve 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 soared 6.2% from a year ago — the biggest 12-month jump since 1990.
The Strategic Petroleum Reserve 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 created in salt domes along the Texas and Louisiana Gulf Coasts. There are roughly 605 million barrels of petroleum in the reserve.
The Biden administration argues that the reserve 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 means that the release nearly 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. “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.”