The federal government is taking the rare step of releasing oil from the nation's Strategic Petroleum Reserve in an effort to address rising gas prices ahead of the holiday season, President Joe Biden said Tuesday.
As part of the move, the Department of Energy will make available 50 million barrels of oil to lower prices and address the mismatch between consumer demand and supply amid the pandemic that has driven prices to their highest levels in seven years, the White House said in a statement.
Biden called the reserve release the largest in U.S. history, and said in an address from the White House that "I will do what needs to be done to reduce the price you pay at the pump."
The action, which has been in the works for several weeks, comes amid growing concern within the White House about inflation as prices rise on everything from fuel to Thanksgiving turkeys. The release of the oil reserves should quickly translate into lower prices at the pump, and officials will be watching to make sure energy companies are passing along lower oil prices to consumers, a senior administration official said Tuesday.
"Consumers are facing challenges at the pump right now, and we are trying to deal with that situation and to deal with it in a smart way, in a tailored way, in an aggressive way, so that's what you're seeing today," the official said in a call with reporters.
The decision was made jointly with other major energy-consuming countries — including India, Japan and South Korea — to curb increasing energy prices after oil-rich nations rejected repeated calls to increase production as the global economy rebounds from the pandemic and fuel demands rise.
"This is a problem not just here in the United States but around the world," he said, noting record gas prices in Europe and Asia.
He added that "while our combined actions will not solve the problem of high gas prices overnight, it will make a difference."
"Before long you should see the price of gas drop where you fill up your tank," the president said.
While the use of the nation's oil stockpile is typically reserved for emergencies, the administration has broad authority to conduct oil exchanges — releases that are repaid to the stockpile — and is partly relying on a previously authorized release, the official said. Of the 50 million barrels, 32 million will be returned to the Strategic Petroleum Reserve over the next three years on the assumption that prices go down in the future, and 18 million will come from a sale approved by Congress in the 2018 budget.
The Energy Department said it plans to release most of the oil between January and April, with some early deliveries accepted in late December. Oil prices have already dropped 10 percent in anticipation of the announcement, the senior administration official said.
Gas prices in the U.S. ahead of Thanksgiving are averaging $3.42 a gallon, the highest since 2014. Parts of the country are experiencing sharper increases, including California where prices are over $4.50 in some areas. More than 48 million people are expected to travel by car over the Thanksgiving holiday, according to predictions by the motorist assistance company AAA.
The Biden administration has attributed the rise in gas prices to the global oil supply not keeping pace with demand around the world as the economy has recovered from the pandemic. It blamed other countries and companies for holding back oil supplies, as well as energy companies for not passing along decreases in oil prices to consumers, the senior administration official said.
Biden asked the Federal Trade Commission last week to investigate what he described as "anti-consumer" behavior by oil and gas companies and whether it could have led to increased gas prices.
The White House has attempted to address gas prices as concerns about inflation have increasingly become a criticism of Biden's presidency. He has seen his approval ratings tumble in recent months, with Americans giving him particularly low marks for his handling of the economy.
Sen. Joe Manchin, D-W.Va., said that while the stockpile move was "an important policy Band-Aid" for increasing gas prices, it would not solve "the self-inflicted wound that shortsighted energy policy is having on our nation."
The moderate Democrat called on Biden to increase domestic energy production, including by reversing course in the Keystone XL pipeline.
"To be clear, this is about American energy independence and the fact that hardworking Americans should not depend on foreign actors, like OPEC+, for our energy security and instead focus on the real challenges facing our country's future,” he said.
Fellow West Virginia Sen. Shelly Moore Capito, a Republican, echoed him, saying Biden's energy policies, including curbs on drilling for oil and gas on public lands, are "completely nonsensical and put our energy independence in further jeopardy while increasing the prices Americans pay at the pump and to heat and light their homes."
In his remarks Tuesday, Biden called claims the price spikes had to do with environmental measures "a myth."
"My effort to combat climate change is not raising the price of gas," he said. He said his clean energy push will lead to more jobs and less of a reliance on oil.
Biden and other administration officials have pressured the Organization of the Petroleum Exporting Countries alliance, led by Saudi Arabia and Russia, to pump more oil in hopes it would lower gas prices. OPEC, whose member countries collectively represent roughly 77 percent of all crude oil reserves, has declined to ramp up production, sticking to its plan for modest monthly increases.
The Strategic Petroleum Reserve was established after the oil crisis of the 1970s as a national energy safety net. The emergency crude oil is stored in four underground salt caverns along the Texas and the Louisiana coasts. The four sites currently hold roughly 620 million barrels of crude oil, the largest emergency supply in the world. The reserve is capable of supplying all of the U.S. consumption needs for roughly one month.
The president can order a full drawdown of the reserve in the event of a severe energy supply interruption and can also order a limited drawdown — up to 30 million barrels — to address short-term emergency needs.
Then-President Barack Obama directed the release of 30 million barrels in 2011 to offset supply disruptions caused by Libya's civil war; in 2005, then-President George W. Bush released 11 million barrels to help refiners hurt by Hurricane Katrina; and in 1991, then-President George H.W. Bush released 17 million barrels in response to the Gulf War.