US President Joe Biden on Tuesday ordered the release of 50 million barrels of oil from a strategic reserve to help reduce energy costs, in coordination with other major energy consuming nations, including China and India. India and Great Britain.
The move is aimed at global energy markets, but also targets voters who are dealing with higher inflation and soaring prices ahead of Thanksgiving and the winter break.
According to the American Automobile Association, the price of gasoline is at $3.40 a gallon, 50% higher than it was a year ago.
Biden has tried to reshape much of his economic agenda around inflation, saying his recently passed $1 trillion infrastructure package will ease price pressures. by making the transportation of goods more efficient and cheaper.
Republican lawmakers forced the administration’s inflation to hit a 31-year high in October. The consumer price index rose 6.2% from a year ago – the biggest gain in 12 months since 1990. .
Senate Republican leader Mitch McConnell tore through the White House in a speech on the floor last week, saying that the victims of higher prices were middle-class Americans.
“The three biggest drivers of the staggering 6.2% inflation we recorded last month were housing, transportation and food,” said the Kentucky senator. “Those are not luxuries, but essentials, and they make up a much larger share of the budgets of middle-class families and below.”
The Strategic Petroleum Reserve is an emergency reserve to maintain access to oil in the event of natural disasters, national security issues, and other events.
Maintained by the Department of Energy, the reserves are stored in caves created in salt domes along the Texas and Louisiana Gulf Straits. Reserves have about 605 million barrels of sweet and sour gasoline.
“As we emerge from an unprecedented global economic shutdown, oil supplies have not kept pace with demand, costing working families and businesses,” Energy Secretary Jennifer Granholm said. , Energy Secretary Jennifer Granholm said in a statement. “This action underscores the president’s commitment to using the tools available to reduce costs for working families and furthering our economic recovery.”
The Biden administration has argued that stockpiling is the right tool to help alleviate supply problems.
According to the Energy Information Administration, Americans used an average of 20.7 million bpd in September.
That means the release roughly equates to about two and a half days of additional supply.
The pandemic has made the energy market – like everything else – difficult on many fronts. As the shutdown began in April 2020, demand fell and oil futures prices turned negative.
Energy traders don’t want to get stuck with crude oil they can’t stock. But as the economy recovered, prices surged to a seven-year high in October.
US manufacturing has yet to recover. Energy Information Administration figures indicate that domestic production averages around 11 million barrels per day, down from 12.8 million before the pandemic began.
Republicans have also seized on Biden’s effort to reduce drilling and support renewables as a reason for the drop in output, despite multiple market dynamics at play as fossil fuel prices continue to fall. more gypsum around the world.
Senator John Barrasso, R-Wyoming said: “President Biden’s policies are driving up inflation and energy prices for the American people. Tapping into the Strategic Petroleum Reserve will not solve the problem. “. “We’re paying a higher price because the administration and Democrats in Congress are waging a war on American energy.”
The White House decision comes after weeks of diplomatic negotiations and the release will be made in tandem with other countries. Japan and South Korea are also participating.
The US Department of Energy will supply oil from the Strategic Petroleum Reserve in two ways; The White House said 32 million barrels will be shipped over the next few months and will return to stockpiles in the coming years.
Another 18 million barrels will be part of the oil sales that Congress had previously authorized.
White House Press Secretary Jen Psaki said Monday night that the White House will also monitor oil companies.
“We will continue to pressurize oil drillers that have posted record profits and are monitoring what we believe to be price-deepening when there is oil supply or oil prices are falling and prices are falling,” he said. gas does not decrease”. Psaki said. “It doesn’t take an economist to know that’s a problem.”