Biden said the administration will adopt a “ready and release plan” that would allow it to “move quickly” to tap into the Strategic Petroleum Reserve in the future “to prevent oil price hikes and respond to international events,” reports NBC News.
The U.S. uses about 20 million barrels of oil a day, and many analysts say the sale of 15 million more barrels from the oil reserve is unlikely to have much effect on gas prices.
The Strategic Petroleum Reserve, which was established as a national energy safety net after the oil crisis of the 1970s, is at its lowest level since 1984.
Reassuring the oil industry
Biden acknowledged that the reserve’s resources have been drained and said his administration would buy crude to refill it once prices fall to $70 a barrel.
Biden, who has pushed oil companies to ramp up oil production for months, said his announcement to refill the reserve should reassure the oil industry that it “can invest to ramp up production now with confidence that they will be able to sell their oil to us.”
“My message to oil companies is this: You’re sitting on record profits, and we’re giving you more certainty so you can act now to increase oil production,” Biden said.
Gas prices drop
Gas prices in the U.S. had been falling after they hit an average of $5.02 per gallon in June. But the cost of gas has ticked back up in the past few weeks after OPEC+ — an alliance of high oil-producing countries that includes Saudi Arabia and Russia — announced this month it would cut production by 2 million barrels a day.
Global energy markets could be squeezed even tighter in December, when a European embargo on Russian oil goes into effect. The embargo was enacted as part of the West’s response to Putin’s invasion of Ukraine.
The Democrats are fighting to hold on to their narrow majorities in the House and the Senate in the November midterm elections. Biden’s approval rating hovers around 43%.
Asked by reporters whether his actions Wednesday were intended to boost Democrats in the elections, Biden said, “It’s not politically motivated at all.”
Transition to green energy
Biden also said his push to increase U.S. oil production did not contradict his administration’s goals to transition to green energy to help fight climate change.
“You can increase oil and gas production now while still moving full speed ahead to accelerate our transition to clean energy. That way we can lower energy costs for American families and enhance our national security at a very difficult moment,” Biden said.
The Strategic Petroleum Reserve’s emergency crude oil is stored in four underground salt caverns along the Texas and the Louisiana coasts. At this time last year, the four sites held about 620 million barrels of crude oil, the largest emergency supply in the world and enough reserve to supply all of the U.S.’s consumption needs for about a month. About 400 million barrels of crude oil are left.
The president can order a full drawdown of the reserve in the event of a severe energy supply interruption and order a limited drawdown to address short-term emergency needs.
Since its establishment, only three other presidents have directed the sale of oil from the reserve, while exchanges have been more common.
Barack Obama directed the release of 30 million barrels in 2011 to offset supply disruptions caused by Libya’s civil war, George W. Bush released 11 million barrels in 2005 to help refiners hurt by Hurricane Katrina, and George H.W. Bush released 17 million barrels in 1991 in response to the Gulf War.
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Source: NBC News