What to know about America’s emergency oil reserve as Biden prepares to tap reserves – WABE
President Biden is planning the largest-ever release of his emergency oil reserve as the United States reels from soaring gasoline prices.
The president announced a plan on Thursday to draw 1 million barrels of oil a day for the next six months from the country’s Strategic Petroleum Reserve (SPR) – for a total of up to 180 million barrels.
The move comes after Russia’s invasion of Ukraine pushed up crude prices, leading to a sharp rise in gas prices.
The administration previously announced last year that it was releasing 50 million barrels, and the White House said earlier this year it would release an additional 30 million barrels — moves that had only temporary impacts. on rising oil prices.
Here is an explainer about the country’s oil reserves.
What is the Strategic Petroleum Reserve?
It is a stockpile of crude oil that the United States maintains in case of emergency. If supplies are disrupted, such as by a hurricane or war, the United States can tap into the reserve and avoid catastrophic shortages.
The SPR was created after the oil crisis of the 1970s. The oil is stored in underground salt caverns in Texas and Louisiana. The caverns currently contain over 500 million barrels of oil, or less than a month’s worth of oil at current US consumption levels.
In addition to being exploited in an emergency, oil from the reserve can also be loaned to oil companies (who pay it back with interest) or sold to raise funds for the federal government.
Congress has already ordered the release of tens of millions of barrels over the next few years for non-emergency reasons.
Why is Biden using the SPR again?
Simply put, because it is currently one of the few tools the President has to drive down oil prices.
Crude prices hit their highest level since 2008 earlier this month, sending the national gasoline price average above $4 a gallon.
And rising energy prices, including natural gas and coal as well as oil, are a major contributor to high inflation.
That has left the Biden White House under intense pressure to do something about high prices, especially ahead of the midterm elections.
After all, history has shown that soaring gasoline and food prices can take a heavy political toll.
What impact would this SPR release actually have?
It’s hard to say how much this would help lower crude prices, and therefore gasoline prices (although it’s clear that a release of up to 180 million barrels would have a bigger impact than the last two American versions totaling 80 million barrels).
Russia’s invasion of Ukraine has disrupted oil markets. The United States has banned oil imports from Russia, but not the European Union.
Nevertheless, the financial sanctions and the wariness to buy Russian oil have led to a drop in the country’s exports which will not be compensated by the American liberation alone.
The International Energy Agency (IEA) estimated earlier this month that Russia could face cuts of around 3 million barrels per day in its oil exports from April. Russia was exporting around 8 million barrels a day.
The other oil producers do not intervene. OPEC and its allies, including Russia, decided on Thursday to stick to their previous plan to gradually increase production, despite pressure from the United States to do more.
Meanwhile, US oil producers – under pressure from their own investors – have also not increased production as much as they typically do when prices are this high.