WASHINGTON — President Biden will release oil from the country’s emergency supply as Americans face rising gas prices amid a surge in inflation ahead of the holiday season, senior government officials say.
The government will source 50 million barrels of crude oil in the Strategic Petroleum Reserve in a coordinated release of oil reserves with Britain, China, India, Japan and Korea in an effort to combat rising world oil prices.
The release of the reserves by the Department of Energy, to be detailed in comments from Mr. Biden on Tuesday afternoon, is intended to address fluctuations in oil supply and demand, government officials said.
The oil price has fallen since the end of October, partly in the expectation that countries would take action to curb energy costs. The US benchmark, West Texas Intermediate, jumped immediately after the administration’s announcement, but then fell to 0.4 percent lower for the day. The price had fallen 4.75% so far this month.
Demand for oil dropped rapidly in the early months of the pandemic, forcing oil-producing countries to cut production. In the United States, reduced demand led to a substantial decline in drilling; the number of oil rigs in the country fell by nearly 70 percent in the summer of 2020.
President Biden has previously appealed to OPEC Plus, the name for the Organization of the Petroleum Exporting Countries along with Russia and other countries, to increase their planned production increases, but was rejected.
The move to tap the U.S. stockpile of crude oil, the largest in the world at 620 million barrels of oil, was also a way for the president to show the administration’s focus on rising gas prices that have worried Americans amid falling prices. approval figures for the administration.
But oil traders had expected a larger amount of oil, said Richard Bronze, head of geopolitics at Energy Aspects, a market research firm in London.
He said there was a big build-up, with speculations as high as 100 million barrels. But “the headlines and numbers we’re seeing now are on the smaller end of the spectrum,” he said, adding “much less than the market has begun to anticipate.”
The US stockpile, stored in underground caverns in Texas and Louisiana, was created by Arab members of the Organization of the Petroleum Exporting Countries after the 1973-74 oil embargo, and has only been tapped in this way in emergencies such as the run-up to the Persian Gulf War in 1991 and the aftermath of Hurricane Katrina in 2005, when much of the Gulf of Mexico’s oil infrastructure was damaged. The reserve is also used to exchange or lend oil to refineries when accidents or storms block shipping channels.
Biden administration officials said the move announced Tuesday would not be an emergency release. Rather, it will come in two parts: a multi-month loan of 32 million barrels to refineries and the accelerated sale of 18 million barrels, which has already been approved by Congress.
Britain will voluntarily allow companies to release their oil reserves. If each company exercises the option, it would release 1.5 million barrels of oil, a British government representative said.
A coordinated release would likely be seen as a challenge by OPEC Plus members and could spark a response next week when the group holds its next monthly meeting.
During recent monthly meetings, the group has stuck to plans to increase production by a relatively modest 400,000 barrels per day each month. Asked about a possible response from OPEC Plus, US officials said on Tuesday the government had worked for weeks to get other oil-producing countries to tap their stocks to guarantee a parallel release, which was a preference of Mr Biden.
At its latest meeting, on Nov. 4, the group said it is committed to ensuring “a stable and balanced oil market,” and that bigger increases could outpace demand as economies struggled to emerge from the pandemic as supply chain disruptions cause delays. and spikes in coronavirus cases fill hospitals in some regions.
On Monday, an official at the International Energy Forum, an organization based in Riyadh, said he expected OPEC Plus to continue with its current plans to increase production by 400,000 barrels per day each month.
“However, certain unforeseen external factors, such as the release of strategic reserves or new lockdowns in Europe, could lead to a reassessment of market conditions,” Joseph McMonigle, the organization’s secretary general, said in a statement.
Biden administration officials on Tuesday tried to frame the move as indicative of the president’s focus on rising gas prices challenging Americans. The officials also pointed to Mr Biden’s request for the Federal Trade Commission to investigate whether oil and gas companies engaged in “illegal behavior” that drove up prices at the pump.
The rise in inflation, as well as concerns about the ongoing pandemic, the haphazard withdrawal from Afghanistan and rising border crossings have contributed to the number of approvals falling during the politically troubling time for the government.
Democrats in Congress recently called on Mr. Biden to take action to provide immediate aid to Americans, including Senate majority leader Chuck Schumer, who earlier his month said the government should tap into the stockpile.
Most experts believe that a release would lower prices modestly, but only for a short time, as oil prices are set globally and world consumption averages about 100 million barrels per day. The average price for a gallon of regular gasoline in the United States rose Tuesday to $3.40 from $2.11 a year ago, according to the travel company AAA. But over the past week, gas prices have begun to level off.
The most recent coordinated release of oil reserves occurred in June 2011, when the United States and 27 other countries released 60 million barrels of reserves to replace lost production from Libya that was halted by political unrest in the North African country. Of the total amount of oil released, about half came from reserves in the United States, the rest from the other 27 industrialized countries that were part of the International Energy Agency. Negotiations over the coordinated response were kept secret for weeks, US officials said.
Stanley ReedEshe Nelsonand Clifford Kraussreporting contributed.