The White House announced Thursday that the US will release 1 million barrels of oil per day from its strategic reserves to help down gas prices and combat inflation across the country.
According to a fact sheet provided by the Biden administration, President Joe Biden plans to utilise the nation’s Strategic Petroleum Reserve over the next six months as domestic producers ramp up production.
“The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time,” the White House said in a release. “This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up.”
According to a senior administration official, the average daily amount released from global strategic reserves should approach 1 million barrels if comparable moves are taken in other countries.
After reports circulated Wednesday evening indicating that a move was impending, oil prices fell on Thursday.
Brent crude futures for May declined 4% to $108.89 a barrel on the international market. Crude oil futures in the United States fell 4.7 percent to $102.84. The contract had gone as low as $100.16 earlier in the day.
The announcement comes as the White House seeks to mitigate the impact of Russia’s invasion of Ukraine on energy costs. While oil prices have fallen from their highs earlier this year, the global turmoil has continued to raise petroleum expenses and raise concerns about the availability of oil and natural gas.
Later, Biden spoke about the administration’s efforts to bring down oil prices, blaming Russian President Vladimir Putin for the most recent surge.
“Many people are no longer buying Russian oil around the world. I banned Russian-imported oil here in America, Republicans and Democrats in Congress called for it and support it. It was the right thing to do,” Biden said.
“But as I said at the time, it’s going to come with a cost,” the president added. “As Russian oil comes off the global market, supply of oil drops, and prices are rising. Now Putin’s price hike is hitting Americans at the pump.”
The recent increase in crude prices has resulted in an increase in domestic gasoline prices, with the national average gallon price of $4.23, up from $2.87 a year earlier. This increase has led to a broader rise in consumer prices for all products and services, as well as a 7.9% increase in inflation year over year.
Biden’s anticipated daily release from the SPR is around 1% of daily global output and 5% of US consumption, according to Roger Read, senior energy analyst at Wells Fargo Securities.
“I don’t want to make it sound like it’s nothing, but you just arrive at the issue where we may be off a lot more than just 1 million barrels. So it helps, but it’s unlikely to solve the problem,” he said. “In the end, it’s a little bit of a Band Aid and I think a little bit of hoping to get later in the year OPEC catch up.”
The White House also used the statement on Thursday to chastise the domestic energy industry for “sitting on” more than 12 million acres of federal land and 9,000 unused but already granted production permits.
Biden specifically urged Congress to levy fines on firms that don’t use wells from their leases on vast swaths of public property.
“Companies that are producing from their leased acres and existing wells will not face higher fees,” the administration said. “But companies that continue to sit on non-producing acres will have to choose whether to start producing or pay a fee for each idled well and unused acre.”
The White House has been engaging with industry leaders to persuade producers to use already sanctioned land to ramp up U.S. capacity, according to a senior administration official, with mixed results.
“We believe the industry needs to step up,” the official said. “It needs to do more, there needs to be investing in additional production.”
“There are companies out there that have said they are, that are doing the right thing,” the person added. But there are others “who’ve said that it doesn’t matter where the price point is, they’re not going to produce more. They’re instead focused on returning dividends and distributions to shareholders.”
In a tweet sent out Thursday afternoon, Energy Secretary Jennifer Granholm stated that her department is “immediately ready to deploy the 1 million barrels per day.”
Biden will also push senators to promote American energy independence by passing legislation that accelerates the transition to sustainable energy, according to the White House.
The president also intends to use the Defense Production Act to encourage the production and processing of minerals and materials such as lithium, nickel, cobalt, graphite, and manganese, which are used in big capacity batteries.
In a fact sheet, the government stated that “The sectors supported by these large capacity batteries—transportation and the power sector—account for more than half of our nation’s carbon emissions.”