Biden announces massive release of oil reserves

The White House has been shaking up in recent days to respond to high gas prices, which have risen significantly after Russia’s invasion of Ukraine. Russia is the world’s third largest oil producer and fears of a supply disruption to global markets have sent energy prices skyrocketing. As of Wednesday, the average price of a gallon of gasoline was $4.24, according to AAA, a dramatic increase from $3.60 a gallon last month and $2.90 a gallon last year.

The United States is coordinating the release with the International Energy Agency and has told allies and partners about the measure, one of the people said.

A White House spokesman declined to comment.

A release of the country’s oil reserves of this magnitude would be “unprecedented in magnitude and duration,” said Bob McNally, advisor and president of Rapidan Energy Group, an energy market research firm. McNally stressed that it will be crucial to see if the Europeans and Japanese join the United States in tapping oil reserves.

“I’d like to see the details, but it’s not surprising — given the significant Russian supply risk has not gone away — that the government is extending releases of the SPR recording,” McNally said. “This would be the first-ever, consecutive, historic move if he made it.”

Bloomberg and Associated Press reported earlier Wednesday that the government is considering releasing 1 million barrels per day.

The price of one benchmark crude fell dramatically after news of the White House’s plans surfaced.

It was not immediately clear how the release of oil reserves would affect prices. The United States previously imported about 800,000 barrels of oil per day from Russia. After the invasion of Ukraine, Biden banned all imports of Russian gas and oil from Russia.

But oil is a globally traded commodity, and other countries like China and India appear to be making up for the decline in US purchases of Russian oil. Patrick De Haan, a policy analyst at Gas Buddy, said the Biden administration risks draining emergency reserves too quickly — if the United States fails, a natural disaster, for example, should force a decline in domestic production.

“At first glance, it’s dazzling … It’s an unexpected announcement and a large number for quite a while,” said De Haan. But, he warned, it could take seven years or more to replace reserves, especially given the challenge of high global demand. “How soon can we replace it? And how much is at stake? That’s what an analyst looks at and I don’t like where that leaves us, and I don’t like how replacement time is probably measured over half a decade or a decade.”

De Haan added: “A lot of Americans on both sides of the aisle are complaining very vehemently about high prices, but there will be hurricanes, there will be events.”

The White House has considered other measures to lower gas prices, such as a gas tax vacation and a tax on the profits of oil and gas companies, but has so far not endorsed either measure. The government in November announced the release of 50 million barrels of oil from the Strategic Petroleum Reserve, but the measure expected to be announced Thursday could overshadow that plan.

Adam Ozimek, chief economist at the Economic Innovation Group, said he hopes the government’s release of oil reserves is accompanied by a plan to encourage production, which will have a bigger impact in the medium term.

“I think it’s a good move to do what they can to ease price pressures in the near term, especially if it’s coupled with a guarantee of more demand going forward to boost production,” Ozimek said.

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