The US will release roughly a million barrels of oil a day from its reserves for six months, a historic drawdown that underscores White House concern about rising gas prices and supply shortages following Russia’s invasion of Ukraine.
President Joe Biden also will invoke Cold War powers to encourage domestic production of critical minerals for batteries for electric-vehicles and other uses, the White House said. Battery materials will join the list of items covered by the 1950 Defense Production Act.
The White House said in a statement that the release from the Strategic Petroleum Reserve was “unprecedented.”
“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,” the White House added.
Biden will order as much as 180 million barrels released from US reserves over the next several months. He’ll speak about his plan at the White House at 1:30 p.m. in Washington.
The administration also will push the International Energy Agency to coordinate releases from reserves by other oil-consuming nations. The organization will meet within days, two people familiar with the matter said, and the administration expects other countries will make some reserve releases but not as much as the US
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Even so, the releases won’t be accompanied by greater production from OPEC+ nations, after the cartel said Thursday it’ll stick to gradual increases. OPEC+, which includes Russia, ratified an existing plan to increase supply in May by 432,000 barrels a day in an online meeting, according to a statement.
The goal of Biden’s plan is to create a bridge for US supply until the fall, when domestic production is anticipated to increase, the White House said.
But OPEC+’s refusal to increase its own production may blunt any effect of the US release, the largest by far in the history of the Strategic Petroleum Reserve.
See also: ‘Drill, baby, drill’ is unlikely under Trump, Exxon says
Oil dropped by more than US$5 ($6.768) a barrel in a matter of minutes following the news late Wednesday of Biden’s plans. Brent crude, the international benchmark, was down 4.7% at US$108.09 as of 1.05pm in London.
“It is hard to overstate the scale of this intervention if it bears out,” Kevin Book, managing director of ClearView Energy Partners, said in a research note. “It would be the largest draw-down volume announced in the 45-year history of the SPR by a factor of 3.6x.”
OPEC+’s decision to stick with plans for a gradual supply increase was in line with expectations. Riyadh has prioritized its relationship with Moscow, which co-leads the OPEC+ alliance, and the cartel insists there’s no shortage of oil in the market.
Yet US gasoline prices are near record highs, even after Biden previously announced releases totaling 80 million barrels in November and March. A gallon of regular unleaded costs about US$4.23 on average, according to the auto club AAA, and almost US$6 in California.
In its statement about Biden’s planned remarks, the White House blamed high gasoline and energy prices on Russian President Vladimir Putin. The Biden administration has said Russia’s ongoing invasion of Ukraine is further disrupting global energy markets.
Pump prices are weighing heavily on the White House’s political prospects in November, when voters will decide whether Biden’s party will retain control of Congress. The president has struggled to tame both gasoline prices and broader inflation, which is at 40-year highs as the global economy adjusts from pandemic disruptions.
Despite the administration’s assurances last year that gasoline prices would fall in 2022, they have instead risen dramatically.
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The previous releases of oil from US reserves have had a muted effect on prices -- US average pump prices rose after the administration began discussing its first release last fall.
Although oil in the stockpile has been sold or exchanged roughly two dozen times, including to mitigate supply disruptions, reduce the deficit and offset federal spending, it’s never been on this scale.
As of March 25, the reserve had 568 million barrels remaining, according to Energy Department data.
