President Joe Biden plans to announce new measures Wednesday to combat high oil and gasoline prices, senior administration officials said. He authorized the release of 15 million barrels from the strategic petroleum reserves, the final tranche of a 180 million barrel program announced in March. And I’m ready to roll out additional barrels to the market.
In addition, the White House is considering the possibility of limiting gasoline exports.
The president on Tuesday directed his economic and energy aides to “be on high alert” to sell more from strategic reserves if needed, a senior administration official said. This should serve as a signal to markets and oil-producing countries that the United States will try to maintain a kind of ceiling on crude oil prices.
Another senior administration official said:
We remain highly prepared and vigilant so that if we have to deal with additional supply side issues with availability, we will have additional capacity with strategic reserves if new sales are required in the future after the December deadline [действующей программы].
New steps could be taken after OPEC+ countries recently decided to cut production by 2 million barrels per day (about 2% of global oil production). The reaction in the United States was very sharp: politicians, including Biden, declared the irresponsibility of such a step in a situation where there is a war in Ukraine and the world is struggling with the highest inflation in almost half a century.
The 15 million barrels allocated under the current program should serve as a “bridge” to when production in the United States and other countries increases, officials say. But analysts note that it is growing slowly in the United States, as shale producers, under pressure from investors, prefer to return profits in the form of dividends rather than intensify drilling. U.S. production remains 1 million barrels per day below pre-pandemic 2019 levels.
“After the OPEC decision and in view of the November elections, the administration needed to do something – and that something seemed to be the announcement of the sale of oil from reserves, which was already planned,” says Amrita Sen of Energy Aspects.
The strategic reserve has become the Biden administration’s main tool to combat high oil and refined product prices, but critics, including Republicans, say it has reduced it to dangerously low levels. There were 409 million barrels in reserves in the first week of October, the lowest since 1984, according to the US Energy Information Administration.
The White House unveiled a reserve replenishment mechanism on Tuesday. Oil for them will be purchased on the spot market when the price drops to $67-72 per barrel, but also by concluding contracts on the futures market. Before this announcement, the price of WTI oil was about $83 per barrel; in morning trading on Wednesday it was $83.4.
This approach should give confidence to oil companies that have been reluctant to invest in increasing production for fear of a possible drop in prices, the first administration official explained: it will guarantee market demand at the announced level.
To curb rising gasoline prices, the White House also does not rule out introducing export restrictions. “All possibilities” are being considered if they help “ensure supply in the domestic market,” officials say. After falling sharply in the summer, gasoline prices have begun to rise again in recent weeks. It now costs just under $4 a gallon, up 60% from when Biden took office in January 2021.