Oil prices are down sharply today following headlines last night that the Biden administration is considering another, bigger release from the Strategic Petroleum Reserve. The administration is trying to get prices under control as we head into the summer months when demand typically rises by 1-2 million barrels per day. Whether or not supply can keep up with this summer’s demand will be the question, but for now, the Biden administration is set on another strategic release to relieve the pressure of gas prices for millions.
The Strategic Petroleum Reserve was created back in the 1970s and has been drawn from slowly since reaching its full 726 million barrel capacity in 2011. President Obama drew from the reserve when Libyan oil supplies were disrupted, and President Trump used sales from the reserve to fund certain legislation during his tenure. Sales accelerated under Biden, with reserves falling 70 million barrels in 2021. Last November, Biden announced a 60 million barrel release in coordination with other countries – the largest release to date. Now, with Biden under political pressure from supporters, he is considering releasing 1 million barrels per day in the coming months, showing that he is still fighting for lower prices. Goldman Sachs noted that the release would be big enough to help move prices a bit, but won’t fix the structural challenges facing oil markets. Put another way, the release is a welcome short-term fix, but it won’t fix the long-term problem of underinvestment in oil exploration.
Biden’s new plan, which could last for as long as six months, could total up to 180 million barrels. This release by the U.S. would correlate with an ongoing push from the International Energy Agency (IEA) to strategize a global release by many different countries. Some believe that the White House could make this strategic reserve announcement as early as tomorrow, though nothing has been confirmed yet. Americans have yet to experience results from gas-related political moves in the past few months even after multiple strategic releases, but there is a positive atmosphere that maybe this time around we will start to see the changes we have been waiting for.