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Fighting gas prices, US to release 50 million barrels of oil

Photo Date: April 16, 2020. Credit: Pexels.

President Joe Biden is ordering 50 million barrels of oil released from America's strategic reserve to help bring down energy costs.

Posted: Nov 23, 2021 2:04 PM

WASHINGTON (AP) — 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.”

Biden said the White House was looking into potential price gouging by gas companies squeezing customers while making money off the lowered oil costs.

The coronavirus pandemic roiled energy markets. As closures began in April, 2020, demand collapsed and oil futures prices turned negative. Energy traders did not want to get stuck with crude that they could not store. But as the economy recovered, prices jumped to a seven-year high in October.

U.S. production has not recovered. Energy Information Administration figures indicate that domestic production is averaging roughly 11 million barrels daily, down from 12.8 million before the pandemic started.

Republicans have also seized on Biden’s efforts to minimize drilling and support renewable energy as a reason for the decreased production, though there are multiple market dynamics at play as fossil fuel prices are higher around the world.

Biden and administration officials insist that tapping more oil from the reserve does not conflict with the president’s long-term climate goals, because this short-term fix meets a specific problem, while climate policies are a long-term answer over decades.

They argue that the administration's push to boost renewable energy will eventually mean less dependence in the U.S. on fossil fuels. But that’s a politically convenient argument — in simple terms, higher prices reduce usage, and significantly higher gasoline prices could force Americans into less reliance on fossil fuels.

"The only long term solution to rising gas prices is to continue our march to eliminate our dependence on fossil fuels and create a robust green energy economy,” Senate Democratic Leader Chuck Schumer said in support of the release.

The White House decision comes after weeks of diplomatic negotiations. Biden and President Xi Jinping of China talked over steps to counter tight petroleum supplies in their virtual meeting earlier this month and “discussed the importance of taking measures to address global energy supplies,” according to the White House.

The Department of Energy will make the oil available from the Strategic Petroleum Reserve in two ways; 32 million barrels will be released in the next few months and will return to the reserve in the years ahead, the White House said. Another 18 million barrels will be part of a sale of oil that Congress authorized.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 515504

Reported Deaths: 10296
CountyCasesDeaths
Harrison34999558
DeSoto33360432
Hinds32743643
Jackson24906392
Rankin22565405
Lee16455245
Madison14954283
Jones14158248
Forrest13834260
Lauderdale12311323
Lowndes11357193
Lamar10693140
Pearl River9748244
Lafayette8868143
Hancock7849132
Washington7559169
Oktibbeha7229138
Monroe7068179
Pontotoc7033110
Warren6885178
Panola6791135
Neshoba6744210
Marshall6707142
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George510680
Prentiss508285
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Scott478999
Tate4777117
Adams4776125
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Copiah458195
Yazoo458092
Simpson4566117
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Newton396182
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Winston318392
Clay312978
Clarke301695
Calhoun286850
Holmes272889
Smith270552
Yalobusha244947
Tallahatchie232353
Greene225149
Walthall222166
Lawrence220242
Perry214556
Amite210357
Webster206548
Noxubee188843
Montgomery182157
Carroll175441
Jefferson Davis174343
Tunica163539
Benton153139
Kemper145441
Choctaw137027
Claiborne134839
Humphreys132239
Franklin126530
Quitman107828
Wilkinson106139
Jefferson97134
Sharkey65321
Issaquena1957
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Alabama Coronavirus Cases

Cases: 848498

Reported Deaths: 16185
CountyCasesDeaths
Jefferson1164292005
Mobile743961384
Madison53544738
Shelby38446371
Baldwin38207589
Tuscaloosa36168644
Montgomery34570782
Lee25677264
Calhoun22632520
Morgan22540411
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Marshall18859318
Houston17790426
St. Clair16963359
Limestone16200220
Cullman16164306
Elmore15948295
Lauderdale15080307
Talladega14265302
DeKalb13093271
Walker12170380
Blount10782193
Autauga10561157
Jackson10217196
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Dale9045192
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Russell710865
Chilton7097170
Covington6972197
Escambia6968144
Franklin6366108
Chambers5804142
Marion5445132
Dallas5303210
Pike5132109
Clarke486086
Lawrence4852130
Winston4799110
Geneva4655136
Bibb436295
Barbour370880
Butler3445101
Marengo342993
Monroe338566
Randolph337967
Pickens335090
Fayette332185
Henry321266
Cherokee320564
Hale319489
Crenshaw261778
Washington256852
Cleburne255460
Lamar253555
Clay253069
Macon246367
Conecuh193562
Coosa186048
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