President Joe Biden on Tuesday ordered the release of 50 million barrels of oil from America’s strategic reserve to help lower the price of gasoline and other energy costs, a move that was taken in coordination with other major energy consumers such as China, India and the United Kingdom.
The measure is intended to help Americans with rising inflation and gasoline prices as Thanksgiving and New Year’s Eve travel nears. Gasoline now costs about $ 3.40 a gallon (90 cents per liter), which is 50% more than a year ago, according to the American Automobile Association.
“While our combined actions will not solve the problems of high gasoline prices overnight, they will make a difference,” Biden promised in a statement from the White House. “It will take time, but soon they will see that the price of gasoline goes down,” he added.
The government will start moving barrels to the market in mid to late December. Gasoline generally takes time to respond to changes in oil prices, and officials said this is one of several steps to help reduce costs.
Oil prices had fallen in the days leading up to Tuesday’s announcement, a sign that investors were anticipating moves that could bring 70 to 80 million barrels of oil combined to global markets. However, after the announcement, prices jumped 2% instead of falling.
The market was waiting for the news and traders were perhaps disappointed when they learned the details, said Claudio Galimberti, senior vice president of oil markets at Rystad Energy.
Shortly after the US announcement, India announced that it would release 5 million barrels of its strategic reserves. The British government confirmed that it will release up to 1.5 million barrels, while Japan and South Korea are also involved. US officials said it was the largest coordinated release of international strategic reserves ever.
Max Blain, a spokesman for British Prime Minister Boris Johnson, said it was “a sensible and measured step to support global markets” during the recovery from the coronavirus pandemic.
Despite the optimistic statements, these actions run the risk of being countered by measures of some oil nations, especially Saudi Arabia and Russia. Riyadh and other Persian Gulf countries have made it clear that they intend to control supply to keep prices high for now.
Biden has reshaped much of his economic agenda around inflation, and says the recently approved $ 1 trillion infrastructure package will reduce price pressure by making it easier and cheaper to transport goods.
Republican lawmakers have criticized the government because inflation in the United States reached its highest level in 31 years in October.
The Strategic Petroleum Reserve is an emergency fund to have crude oil in the event of natural disasters, national security issues, and other events. It is maintained by the Department of Energy and is found in caverns created in salt domes on the Gulf of Mexico coast in Texas and Louisiana. There are about 605 million barrels of oil in the reserve.
The Biden administration argues that it is the right tool to help alleviate the supply problem. Americans used an average of 20.7 million barrels a day during September, according to the Energy Information Administration. That means the release equates to about two and a half days of extra supply.
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