By ZEKE MILLER and JOSH BOAK
WASHINGTON (AP) — President Joe Biden on Thursday ordered the release of 1 million barrels of oil a day from the country’s Strategic Petroleum Reserve for six months, an attempt to rein in energy prices that soared after the United States and its allies imposed severe sanctions on Russia over its invasion of Ukraine.
The president said it’s unclear how much gas prices might drop as a result of his move, but he suggested it could be “10 cents to 35 cents a gallon.” Gas averages about $4.23 a gallon, down from $2.87 a year ago, according to AAA.
“The bottom line is if we want lower gas prices, we need to have more oil supply right now,” Biden said. “This is a time of consequence and peril for the world, and pain at the pump for American families.”
The president also wants Congress to impose financial penalties on oil and gas companies that lease public land but do not produce. He said he would use the Defense Production Act to encourage the mining of critical minerals for electric vehicle batteries, as part of a broader initiative to shift to cleaner and more energy sources. reduce the use of fossil fuels.
Stocks show that oil remains a vulnerability for the United States. Rising prices have hurt Biden’s approval domestically and added billions of oil export dollars to the Russian government as it wages war on Ukraine.
Mining the stockpile would create pressures that could lower oil prices, although Biden has twice ordered reserve releases without causing a significant shift in oil markets. Biden said Thursday he expects gas prices to come down “quite significantly.”
Part of Biden’s concern is that high prices have so far failed to cause a significant increase in oil production. The planned release is a way to boost supplies as a bridge until oil companies increase their own production, with administration officials estimating that domestic production will increase by 1 million barrels per day this year and 700,000 additional barrels per day in 2023.
Markets reacted quickly, with crude oil prices falling around 4% on Thursday to below $104 a barrel. Still, oil is up from around $60 a year ago as supplies fail to keep up with demand as the global economy began to rebound from the coronavirus pandemic. This inflationary problem was compounded by Russian President Vladimir Putin’s invasion of Ukraine, which created further uncertainty over oil and natural gas supplies and led to retaliatory sanctions by the United States and its allies.
Stewart Glickman, an oil analyst for CFRA Research, said the release would provide short-term relief on prices and would be like “taking Advil for a headache.” But markets would ultimately look to see if, after the publication halts, the underlying issues that led to Biden’s decisions remain.
“The root cause of the headache will likely still be there after the medication wears off,” Glickman said.
Biden is in talks with allies and partners to join in additional oil releases, so the global market will get more than the 180 million total barrels promised by the United States.
Americans use an average of about 21 million barrels of oil a day, about 40% of which is spent on gasoline, according to the US Energy Information Administration. This total represents about one-fifth of total world oil consumption.
Domestic oil production accounts for more than half of US consumption, but high prices have not led companies to return to their pre-pandemic production levels. The United States produces an average of 11.7 million barrels per day, up from 13 million barrels at the start of 2020.
Republican lawmakers said the problem stemmed from the administration’s hostility to oil permits and the construction of new pipelines such as the Keystone XL. Democrats say the country must switch to renewable energy such as wind and solar which could reduce reliance on fossil fuels and Putin’s influence.
Sen. Steve Daines, R-Mt., lambasted Biden’s action to exploit the reserve without first taking steps to increase U.S. energy production, calling it “a band-aid on a gunshot wound.”
Daines called Biden’s actions “desperate moves” that avoid what he called the real solution: “investing in American energy production” and securing “resumption of oil and gas leases.”
The administration says increasing oil production is a gradual process and the release would provide time to increase production. He also wants to encourage greater production by imposing fees on unused leases on government land, which would require congressional approval.
Oil producers have been more focused on meeting the needs of investors than consumers, according to a survey released last week by the Dallas Federal Reserve. About 59% of executives surveyed said pressure from investors to preserve “capital discipline” amid high prices was the reason they weren’t pumping more, while less than 10% blamed government regulation.
In his remarks Thursday, Biden tried to shame oil companies he says are focused on profit instead of producing more barrels, saying increasing oil supplies was a patriotic obligation.
“Now is not the time to sit on record profits: it is time to intervene for the good of your country,” the president said.
The steady release of reserves would represent a significant sum and come close to closing the national output gap from February 2020, before the coronavirus caused a sharp drop in oil production.
Still, oil politics are complicated, with industry advocates and environmentalists both critical of the planned release. Groups such as the American Petroleum Institute want to make drilling easier, while environmental organizations say energy companies should instead be forced to pay a special windfall tax.
The administration announced in November the release of 50 million barrels from the strategic reserve in coordination with other countries. And after the start of the Russian-Ukrainian war, the United States and 30 other countries agreed to release an additional 60 million barrels of reserves, half of the total coming from the United States.
According to the Department of Energy, which manages it, more than 568 million barrels of oil were held in the reserve as of March 25. After release, the government would begin to replenish the reserve once prices had fallen sufficiently.
News of the administration’s planning was first reported by Bloomberg.
Associated Press writers Alex Veiga, Darlene Superville, Matthew Daly and Michael Balsamo contributed to this report.