In a bid to head off more increases in the price of gasoline at the pump, the Biden administration plans to release 1 million barrels of oil per day from the U.S. Petroleum Reserve for the next 180 days.
It will be the largest withdrawal from the reserve since it was first created in the wake of the first oil crisis back in the 1970s. The oil will be replaced at a later date when the price of oil falls well below the current level of nearly $110 per barrel, officials said.
Biden said he is acutely aware of the pain rising gas prices cause Americans. But blamed the price increases on the Russian invasion of Ukraine, which triggered sanctions, including many designed to impact the Russian oil industry. Russia is the world’s third largest producer of oil after the U.S. and Saudi Arabia and the world’s largest exporter of oil.
Finger pointed at Putin
“Our prices are rising because of (Russian President Vladimir) Putin’s actions. There isn’t enough supply. And the bottom line is if we want lower gas prices, we need to have more oil supply right now,” Biden said.
“Your family budgets to fill a tank — none of it should hinge on whether a dictator declares war.”
As the cost of a barrel of oil has settled near $110, the gas price decline has slowed. After hitting $4.33 on March 11, the national average for a gallon of gasoline is now $4.24, but only down a penny since last week, AAA reports.
Domestically, gasoline demand is again defying seasonal trends, dipping for the second straight week, perhaps due to higher pump prices and consumers altering their driving habits, according to AAA.
The withdrawals from the strategic reserve are designed to last through the summer driving season when gasoline prices are very likely to bump up against $5 per gallon. Biden also warned domestic oil companies to pick up the pace of drilling in the continental United States, reminding companies they could lose their old leases to drill on federal land if they don’t use them
Volatile oil market globally
Besides the war in Ukraine, which sent gasoline soaring over $4 per gallon at the end February, according to AAA, the pandemic also disrupted oil production. Two years ago in spring 2020, the price of oil was negative as producers had to pay to offload their crude. It also halted the drilling of new wells.
The steady economic recovery in North America, Europe and East Asia sent demand for oil up even before the conflict in Ukraine, pushing up gasoline prices from the massive drop seen during the pandemic.
Biden noted oil production in the United States, the world’s largest producer of energy, will take time to return to pre-pandemic levels after the shocks of the past two years.
Rising energy prices, highlighted by the jump in gasoline prices, have been a major factor in inflation, which is now at its highest level in 40 years The high price of gasoline, couple with the cost of moving goods dependent motor transport from big trucks to delivery vans is expected to add to the inflationary pressure during the next few months.