Biden announces release of historic oil reserves, along with other measures, to reduce gas prices
President Joe Biden is announcing an unprecedented release of oil from U.S. reserves and taking action to punish oil companies for not increasing production from unused leases on federal lands, the White House has said.
The measures are an attempt to reduce gas prices while forcing oil companies to increase supply. The dramatic step, which Biden was expected to announce from the White House later Thursday, confronts what became a looming political issue months before the midterm elections.
“After consulting with allies and partners, the President will announce the largest release of oil reserves in history, bringing an additional million barrels to market on average daily – every day – for the next six months,” the White House said. “The scale of this release is unprecedented: the world has never had a release of oil reserves at this rate of one million per day during this time. This record release will provide a historic amount of supply to serve as a bridge until the end of the year, when national production will increase.
The release would amount to 180 million barrels of oil. White House officials said it would act as a “bridge” as U.S. and global oil production resumes after the coronavirus pandemic. The decision was made in coordination with US allies abroad, including in Europe, although officials declined to say whether other countries were also releasing barrels from their reserves.
The United States will replenish barrels into the reserve when oil prices are lower, the official said, which could help boost production further in the future.
Still, officials declined to say how fast or how much gasoline prices might drop following the release. And they said they weren’t focusing on “immediate, short-term price movements” in the oil market. Instead, they said their aim was to address a lack of supply due to the withdrawal of Russian oil from the market, adding that this would result in relief for American consumers.
Biden earlier in the month announced a coordinated release of oil from reserves in conjunction with other countries. It also released about 50 million barrels in November, which it said was at the time the largest release from the reserve in US history.
None of these measures had a significant effect on gas prices, which continued to rise as global limits on Russian energy exports caused prices to spike.
The United States consumes about 20 million barrels of oil per day, with global consumption hovering around 100 million barrels. Biden’s planned exits would put more oil on the global market, which could reduce costs.
The president is also asking Congress to “make the companies pay royalties on wells in their leases that they haven’t used in years and on acres of public land that they are hoarding but not producing.” For months, the Biden administration has publicly pushed back against the idea that regulations are preventing oil producers from increasing domestic production, pointing to millions of acres of land with approved permits for oil and gas production.
“Companies that produce from their leased acres and existing wells will not face higher fees,” a White House released fact sheet states, “but companies that continue to sit on non-producing acres will have to choose to start producing or pay a royalty for each unused well and unused acre.
Biden will also issue a directive invoking the Defense Production Act to boost domestic production of critical minerals needed to make electric vehicle batteries and long-term energy storage.
The White House move adds critical minerals such as lithium, nickel, graphite, cobalt and manganese to the list of items covered by the Defense Production Act of 1950, a law from the time of the Korean War allowing the President to use emergency authority to place large orders. of a certain type of product or increase production capacity and supply. It will allow the administration to support the production and processing of these critical minerals necessary for a clean energy transition.
The Department of Defense will implement that authority, according to the White House, and will do so in consultation with tribal communities and using strict environmental, labor and community standards.
Tapping the reserve – the 600 million barrel stockpile of crude oil stored in underground salt caverns in Louisiana and Texas – generally has only a limited effect on gas prices due to the amount of oil that can be released at once, but would act as a political sign that Biden continues to deal with the issue.
Following Russia’s invasion of Ukraine, US regular gasoline prices soared, hitting a record high of $4.33 a gallon earlier in March.
Yet the current cost increases began months ago, as oil demand surged as the coronavirus pandemic waned. The White House has expressed frustration that oil companies have not brought production back to pre-pandemic levels, instead focusing on paying dividends to investors.
There has been internal debate among administration officials about the severity of the prosecutions against oil and gas companies for failing to increase production. Biden has chastised them in previous remarks, but some officials believe a full-on campaign against the companies could backfire.
Russia’s invasion of Ukraine provided Biden with another foil. In remarks earlier this month, Biden sought to pin the blame for the price hike on the Russian president: “Make no mistake: the current spike in gasoline prices is largely the fault of Vladimir Poutine. Since then, he has been repeating the phrase “Putin’s price hike”.
Governors across the United States have tried to cut gas prices at the state level.
Last week, California Democratic Governor Gavin Newsom rolled out $9 billion proposal to distribute $400 debit cards to drivers across the state to help mitigate the impact of the nation’s highest gas prices. In Georgia, Republican Gov. Brian Kemp — who faces one of the toughest re-election races in the country — signed a invoice it will give Georgians $250 to $500 in tax refunds — a move that several of his rivals have called election-year politics.
And as Democratic Governor Janet Mills faces a competitive re-election campaign in Maine, she has offered some of the most generous relief to qualified taxpayers in her state – in the form of $850 checks – to cushion the blow of inflation and gasoline prices.
This story has been updated with background information.
CORRECTION: A previous version of this story incorrectly stated the release of the Strategic Petroleum Reserve last year. It was 50 million barrels.