The recent increase in gasoline prices has left President Biden scrambling for solutions.
The possibility that the Biden administration will release crude oil from the country’s emergency oil stockpile, known as the Strategic Petroleum Reserve, has sparked considerable interest.
Much will determine by oil prices, which have risen dramatically in the last year, returning to pre-pandemic levels and then some. However, after reaching more than $86 in October, they have since fallen to less than $80. Prices influenced by various factors, including the White House, are now considering tapping the stockpile.
Here’s a primer on the country’s oil reserves and whether tapping them would be worthwhile. At current U.S. consumption levels, that is slightly less than one month’s worth of oil.
Biden considering tapping the SPR now
The emergency oil reserve isn’t supposed to be used to manage prices — it’s supposed to deal with significant supply disruptions, which the market isn’t currently experiencing. However, it is one of the few tools at the president’s disposal for lowering oil prices.
Crude oil prices in the United States reached seven-year highs in October. It was a rapid increase compared to earlier in the pandemic, when prices briefly fell below zero, implying that oil traders were paying others to take barrels off their hands. Despite White House requests, OPEC has declined to increase production to address high prices. As the global economy continues to recover from the pandemic, the oil cartel led by Saudi Arabia has maintained its gradual increases in production.
Under pressure from their investors, U.S. oil producers have not increased output as much as they usually do when prices are this high.
As a result, the Biden White House is under intense pressure to address high prices. After all, history has shown that rising gas and food prices can have a significant political impact.
Countries tapped their reserves
Coordination of a release with other countries could boost the impact of an SPR release. The White House has asked other major oil consumers with their petroleum reserves to release oil from their accounts in a single coordinated action. China is reportedly considering releasing its SPR, though it’s unclear if this response to Biden’s appeal. Other countries have stated that their reserves should save for potential supply shocks rather than moving prices.
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