Topline
President Joe Biden will release 1 million barrels of oil per day from the Strategic Petroleum Reserve over six months, in the largest use yet of the federal emergency stockpile, the White House said in a statement Thursday, in an effort to combat a spike in oil and gasoline prices that has worsened since Russia’s invasion of Ukraine, and the administration will also invoke Cold War powers to boost domestic production of metals critical for electric vehicle batteries.
The Federal Strategic Petroleum Reserve facility in Texas.
Key Facts
The White House said it decided to tap the oil reserve after discussions with allies, calling the recent increase in energy prices “Putin’s price hike.”
The release is “unprecedented” and will mark the largest release of oil reserves in history, the White House said.
The total release of around 180 million barrels is the equivalent to the amount used around the world in two days, Reuters reported.
The amount of oil consumed in the United States averages around 21 million barrels a day, of which around 40% is gasoline, according to the Energy Information Administration.
West Texas Intermediate oil futures for May were down 3.7% to $103.83 a barrel as of noon ET.
Biden will also authorize use of the Defense Production Act to increase domestic production of minerals and materials that go into large-capacity batteries, such as lithium, nickel and cobalt, the White House said, aiming to reduce America’s reliance on China and other countries for electric vehicle batteries.
Crucial Quote
The oil release “would reduce the amount of necessary price-induced demand destruction, the sole oil rebalancing mechanism currently available in a world devoid of inventory buffers and supply elasticity,” Goldman Sachs said in a note Thursday. “This would remain, however, a release of oil inventories, not a persistent source of supply for coming years,” the note said, adding the oil release would not address the structural supply deficit.
Key Background
The U.S. has tapped the strategic reserve twice in the past six months, once after Russia launched its attack on Ukraine Russia is the world’s largest exporter of oil products and the second-largest exporter of crude oil, according to the International Energy Agency. The U.S. and the European Union have imposed sanctions on Russia that block providing oil technology to Russia, and the U.S. has banned imports of Russian oil and gas. Major oil production companies, including ExxonMobil, BP and Shell, have moved to unwind their businesses in Russia.
Further Reading
Oil Prices Drop Nearly $5 A Barrel Amid Reports Of Washington Tapping Into Strategic Reserve (Forbes)
What a 180-Million-Barrel Oil Release May Mean for the Market (Bloomberg)
Source: https://www.forbes.com/sites/lisakim/2022/03/31/biden-administration-orders-record-oil-release-from-strategic-reserve/