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Thursday, August 11, 2022

Biden poised to release up to 1 million barrels a day from oil reserve to control gas costs

President Biden is exploring a proposal to release one million barrels of oil a day from the Strategic Petroleum Reserve for as long as 180 days, a move that would add a huge quantity of oil to the global market, according to a source familiar with the White House talks on the topic.

Mr. Biden might announce the plan to tap the reserve as soon as Thursday, said the official, who sought anonymity because the proposal was not ready to be revealed Wednesday night. The objective would be to offset increasing costs at the pump.

The price of West Texas Intermediate, the American crude oil standard, dipped almost 4 percent late Wednesday evening after the proposal was disclosed, by Bloomberg News. The price of Brent oil, the worldwide standard, was also down, around 3.5 percent.

If fully approved, the president’s proposal would release 180 million barrels from the reserve, which is meant to assist the United States weather surges in demand or reductions in supply. Roughly 550 million barrels are in the reserve, which has a stated total capacity of about 714 million barrels.

Mr. Biden has been under growing political pressure for months as the price of gasoline has gradually climbed, in part because of uncertainty produced by Russia’s invasion of Ukraine and five weeks of war there.

This month, the average price of a gallon of gasoline touched a record of $4.17, passing the previous top of $4.11 established in 2008, which is not adjusted for inflation. The increasing cost of petrol has emphasised wider inflation in the United States that has damaged the pocketbooks of Americans already battling to recover from the two-year epidemic.

David Goldwyn, a senior State Department energy official in the Obama administration, termed the initiative “a smart move.” “Go large to have impact,” he added. “At this stage, anything helps at the margin.”

In November, Mr. Biden released 50 million barrels from the petroleum reserve, an amount that many analysts felt was too modest to meaningfully enhance the world supply of oil or drive down prices at the pump. On March 1, Mr. Biden announced the release of a further 30 million barrels, in concert with a release of an additional 30 million barrels from other nations across the globe.

But the price of gas has continued to grow, and the political pressure has not eased up.

Republicans have attacked Mr. Biden for weeks and have made plain that they want to exploit the issue of inflation — particularly increasing gas prices — as a political cudgel against Democrats facing voters this fall in legislative midterm elections.

White House officials have frequently indicated they feel inflation is a real worry, but have emphasised that Republicans are delaying the president’s legislative initiatives to decrease prices on things like child care, health care, education and other fundamental necessities.

They have also accused local oil businesses for failing to grow output to satisfy the demand and aid to alleviate pressure on prices. Jen Psaki, the White House press secretary, made that point at a briefing for reporters two weeks ago.

The United States uses around 20 million barrels of oil a day. Rising energy costs have led to high inflation and encouraged OPEC Plus, the cartel of oil producers that comprises the Organization of the Petroleum Exporting Countries, Russia and others, to pump more oil.

Mr. Biden’s release of 50 million barrels scarcely affected the market. The globe uses around 100 million barrels a day, and prices are established on this worldwide market. When this oil was released, it was done in conjunction with other foreign nations, notably Britain, India, Japan and South Korea.

The emergency stockpile is held in subterranean caves in Texas and Louisiana. The reserve was formed following the 1973-74 oil embargo by Arab members of OPEC, and has been used in crises like the buildup to the Persian Gulf war in 1991 and the aftermath of Hurricane Katrina in 2005, when most of oil infrastructure along the Gulf of Mexico was devastated.

David Faber
I am a Business Journalist of The National Era
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