The 'oil piggy bank' is running low — but President Biden says he'll replenish it when prices hit a range of $67 to $72 a barrel. Will the plan work?
President Biden is drawing another 15 million barrels from the U.S. emergency reserves — and “is prepared to authorize” additional sales in the coming months if needed.
The White House announced on Tuesday that the Department of Energy will deliver more crude oil from the Strategic Petroleum Reserve (SPR) to the market in December, in order to drive down prices at the pump.
The release from the White House added the Biden administration has plans for replenishing the SPR once prices drop, after it received backlash from some experts for draining America’s “oil piggy bank” — which was established for emergency use during an oil supply or economic crisis.
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Using the SPR to drive down gas prices
With the addition of these 15 million barrels, Biden will complete his plan to release a total of 180 million barrels — something he committed to back in the early days of Russia’s war in Ukraine.
The White House announcement comes just a few weeks after the president revealed he intends to release 10 million barrels from the SPR in November. That move was made primarily in response to the Organization of the Petroleum Exporting Countries’ (OPEC+) plans to slash oil production by 2 million barrels a day.
But even before the OPEC+ news was released, gas prices had started to creep up again, following a 98-day streak of lower prices over the summer.
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By selling more crude oil from the reserves, Biden hopes to help bring prices back down. He’s also urging energy companies to do their part by investing in production and passing on their savings on to consumers.
As profits of the six largest publicly traded oil companies topped $70 billion in the second quarter of this year, Biden noted that those companies spent $20 billion on stock buybacks.
“My message to the American energy companies is this: You should not be using your profits to buy back stock or for dividends. Not now. Not while a war is raging,” the president said in a press conference on Wednesday.
“You should be using these record-breaking profits to increase production and refining.”
Will Biden’s new plan support long-term stability?
This decision triggered some concern — depleting the emergency oil reserves could put the country at risk in the future if the global or domestic oil supply ever reaches dangerously low levels.
However, the Biden administration maintains that the SPR is still the largest strategic reserve across the globe. It has about 400 million barrels remaining, which Biden says is “more than enough for any supply emergency.”
However, the U.S. consumed nearly 20 million barrels a day in 2021 — which means the reserve contains only about 20 days’ worth of domestic supply.
Biden says he plans to repurchase supplies when prices drop to or below $67 to $72 per barrel, calling this a win for both taxpayers and energy security. The Department of Energy is also in the process of finalizing a rule that will one day allow it to enter fixed-price contracts through a competitive auction process for oil to be delivered to the SPR.
Biden says this strategy “will protect taxpayers and help create certainty around future demand for crude oil.”
U.S. crude oil currently stands at about $88 a barrel, with gas prices averaging $3.83 a gallon nationally.
Some experts remain skeptical that these efforts will significantly impact the price of gas. Prices may have shot up recently due to refinery issues, but CNN reports that lower demand and cheaper blends of gas required in winter — as well as a likely recession — could lower gas prices on their own.
American Petroleum Institute president and CEO Mike Sommers also criticized Biden’s decision in a statement on Wednesday: “At a time when American energy can be a stabilizing force at home and abroad, we urge caution in continuing to rely on short-term efforts that are no substitute for sound long-term policies that enable American energy leadership."
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