President Joe Biden on Wednesday will announce the release of 15 million barrels of oil from the US strategic reserve as part of a response to production cuts recently announced by OPEC+ nations, and he will say further declines are possible this winter, how his government is in a hurry than pulling out all the stops ahead of next month’s midterm elections.
Biden will make comments Wednesday to announce the strategic reserve drawdown, senior administration officials said Tuesday on condition of anonymity to outline Biden’s plans. This completes the release of 180 million barrels approved by Biden in March, which was originally scheduled to happen over six months. That has brought the strategic reserve to its lowest level since 1984, in what the government called a “bridge” until domestic production could be ramped up. The reserve now contains about 400 million barrels of oil.
Biden will also open the door to more releases this winter to keep prices down. But government officials would not say how much the president would be willing to tap, nor how much they plan to increase domestic production to end the withdrawals.
Biden will also say the U.S. government will replenish the strategic reserve if oil prices are at or below $67-$72 a barrel, a bid that government officials argue will support domestic production by providing a base level of demand guaranteed. But the president is also expected to renew his criticism of oil company earnings – repeating a bet made this summer that public condemnation would be more important to these companies than shareholder focus on returns.
It marks the continuation of an about-face by Biden, who has been trying to move the US past fossil fuels to identify additional sources of energy to meet US and world supplies, in the wake of disruptions from Russia’s invasion of Ukraine and the Saudi Arabia-led oil cartel led by announced production cuts.
The projected loss of 2 million barrels a day – 2% of global supply – has prompted the White House to side with Saudi Arabia with Russian President Vladimir Putin and promise there will be consequences for supply cuts affecting the country could support energy prices. According to the Energy Information Administration, releasing 15 million barrels would not even cover a full day’s oil consumption in the US.
Administration could make a decision on future releases in a month as it takes the government a month and a half to notify potential buyers.
Biden still faces political headwinds over gas prices. AAA reports that gas averages $3.87 per gallon. That’s down slightly over the past week but up from a month ago. The recent price hike put a brake on the momentum seen by the President and his fellow Democrats in the polls ahead of November’s election.
Analysis Monday by ClearView Energy Partners, an independent Washington-based energy research firm, suggested that two states that could decide control of the evenly split Senate — Nevada and Pennsylvania — are sensitive to energy prices. The analysis found that gas prices rose above the national average over the past month in 18 states that house 29 potentially “at-risk” House seats.
Even if voters want cheaper gas, the expected gains in supply will not materialize due to a weaker global economy. The US government revised its forecast downwards last week, saying domestic firms would produce 270,000 barrels less per day in 2023 than forecast in September. Global production would be 600,000 barrels per day lower than forecast in September.
The hard math for Biden is that oil production has yet to return to pre-pandemic levels of around 13 million barrels a day. It’s about a million barrels a day below that level. The oil industry wants the government to open up more state drilling land, allow pipelines to be built and reverse its recent changes to increase corporate taxes. The administration counters that the oil industry is sitting on thousands of unused federal leases and says new permits would take years to produce oil without affecting current gas prices. Environmental groups, meanwhile, have asked Biden to honor a campaign promise to block new drilling on federal land.
Biden has opposed the policies of US oil producers. Instead, he’s trying to lower prices by releasing oil from the US reserve, shaming oil companies for their profits and demanding higher production from countries in OPEC+ that have other geopolitical interests, said Frank Macchiarola, senior vice president of policy , Economics and Regulatory Affairs at the American Petroleum Institute.
“If they continue to offer the same old so-called solutions, they will continue to get the same old results,” Macchiarola said.
Because fossil fuels lead to carbon emissions, Biden has sought to move away from them entirely and commit to zero emissions by 2050. Discussing that commitment almost a year ago after the G-20 leaders in the rich and developing world met in Rome, the President said he still wants to lower gasoline prices because “at $3.35 a gallon it has a profound impact on working-class families just to go back and forth to work”.
Since Biden spoke of gasoline’s pain at $3.35 a gallon and his hopes of cutting costs, the price has risen another 15.5% on balance.
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