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US to release 50 million barrels of oil to cut energy costs

Storage tanks are shown at a refinery in Detroit on April 21, 2020. The White House announced Tuesday it has ordered 50 million barrels of oil from the strategic reserve to reduce energy costs. (Paul Sancya, Associated Press)

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WASHINGTON – President Joe Biden on Tuesday ordered 50 million barrels of oil from the strategic reserve to help reduce energy costs, in coordination with other major energy consuming countries including China, India and the United Kingdom.

The move targets global energy markets, but also voters facing higher inflation and rising prices ahead of Thanksgiving and the winter holidays. The price of gas is about $ 3.40 per gallon, more than 50% more than a year ago, according to the American Automobile Association.

There was no noticeable impact on the benchmark US crude barrel price following Tuesday’s announcement. Prices have gone up and down all month and are up less than 1% so far in this shortened holiday week.

Biden was quick to reshape much of his economic agenda around the issue of inflation, saying his recently passed $ 1 trillion infrastructure package will reduce pricing pressures by making freight transportation more efficient and less expensive.

Republican lawmakers hammered the administration so that inflation peaked in 31 years in October. The Consumer Price Index climbed 6.2% from a year ago, the biggest 12-month jump since 1990.

Republican Senate Leader Mitch McConnell burst into the White House in a speech last week, claiming the victims of the price hike were middle-class Americans.

“The top three drivers of the staggering 6.2% inflation rate we recorded last month were housing, transportation and food,” the Kentucky senator said. “These are not luxury goods, they are essentials, and they occupy a much larger share of the budgets of families from the middle class to the bottom.”

The Strategic Oil Reserve is an emergency stockpile to preserve access to oil in the event of natural disasters, national security concerns and other events. Maintained by the Department of Energy, the reserves are stored in caves created in salt domes along the Gulf coasts of Texas and Louisiana. There are approximately 605 million barrels of sweet and sour oil on the reserve.


As we emerge from an unprecedented global economic crisis, the supply of oil has not kept up with demand, forcing working families and businesses to pay the price.

–Jennifer Granholm, Energy Secretary


“As we emerge from an unprecedented global economic crisis, the supply of oil has not kept up with the demand, forcing families and businesses to pay the price,” said Energy Secretary Jennifer Granholm in a press release. “This action underscores the president’s commitment to use the tools available to reduce costs for working families and continue our economic recovery.”

The Biden administration has argued that the reserve is the right tool to help alleviate the supply problem. Americans used an average of 20.7 million barrels a day in September, according to the Energy Information Administration. This means that the release almost equates to about two and a half days of additional supply.

The pandemic has turned energy markets – like everything else – out of whack on several fronts. When the closures began in April 2020, demand collapsed and oil futures prices turned negative. Energy traders didn’t want to end up with crude they couldn’t store. But as the economy recovered, prices hit a seven-year high in October.

American production has not recovered. Figures from the Energy Information Administration indicate that national production averages around 11 million barrels per day, up from 12.8 million before the start of the pandemic.

Republicans have also taken advantage of Biden’s efforts to minimize drilling and support renewables as the reason for the decline in production, although there are multiple market dynamics at play as fossil fuel prices are higher in the world. world.

“President Biden’s policies increase inflation and energy prices for the American people. Tapping into the strategic oil reserve will not solve the problem,” said Senator John Barrasso, R-Wyoming. “We are experiencing higher prices because the administration and Congressional Democrats are waging a war on American energy.”

The White House decision comes after weeks of diplomatic negotiations and the release will be taken in parallel with other nations. Japan and South Korea are also participating.

The US Department of Energy will make oil available from the Strategic Oil Reserve in two ways; 32 million barrels will be released in the coming months and will return to the reserve in the years to come, the White House said. An additional 18 million barrels will be part of an oil sale that Congress previously authorized.

White House press secretary Jen Psaki said Monday evening that the White House would also keep an eye on oil companies.

“We will continue to put pressure on the oil companies that have made record profits and watch what we see as lower prices there when there is a supply of oil or the price of oil goes down and the price goes down. gas is not going down, ”Psaki says. “It doesn’t take an expert in economics to know this is a problem.

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Mary Cashion

The author Mary Cashion