In an effort to counter rising prices at gas stations, President Biden plans to plunder the country’s “oil piggy bank.”
In November, the Department of Energy will deliver to the market 10 million barrels of the Strategic Petroleum Reserve (SPR). The SPR, the world’s largest emergency crude oil supply, was established in 1975 in the event of a severe oil supply crisis or economic disruption.
Biden’s decision comes after the Organization of the Petroleum Exporting Countries (OPEC+) said it would cut oil production by 2 million barrels per day, putting additional pressure on the world energy supply.
However, with the country’s emergency reserve already at its lowest levels since 1984, some experts are concerned about the long-term implications.
do not miss
Gas prices in the US rise again
Gasoline prices hit a record high of $5.02 a gallon in June after the Russian invasion of Ukraine, but this summer saw a 99-day run of low prices due to recession fears and falling oil prices.
However, even before OPEC+ declared that it would cut oil production, gas prices started rising again in late September. This may be due to a combination of increased demand, refinery problems and the upcoming European ban on Russian oil.
Now, with the recent OPEC+ decision, prices are expected to rise further. The group says the production cuts are due to “uncertainty surrounding the global oil market and economic outlook.”
As of October 7, the national average price of gasoline was $3.89 per gallon, about 10 cents higher than the previous week, according to AAA.
Biden disappointed by ‘short-sighted’ production cut
Hours after the OPEC+ announcement, the White House said the president was disappointed by “OPEC+’s short-sighted decision to cut production quotas” as the world economy still grapples with the effects of the Russian invasion of Ukraine. .
The press release said that 10 million barrels of oil would be drained from the SPR and that the energy ministry would be exploring other options to increase domestic production.
Read more: Do you belong to the lower, middle or upper class of the United States? How your income accumulates
Biden also urged gas companies to keep lowering gasoline prices.
Why making large withdrawals from the reserve could be risky
Since March, the Energy Department has released 160 million barrels of crude oil, or more than a quarter of the reserves, draining the SPR to its lowest levels in four decades.
As of September 30, the reserve was down to 416 million barrels, according to department data.
The Independent Petroleum Association of America (IPAA) stated in November 2021 that it was strongly opposed to tapping into oil reserves to offset gas prices. The group’s concern was that depletion of the emergency stockpile could put the US at risk if national or global oil supplies reach dangerously low levels before they can recover.
The IPAA recommends increasing domestic production of natural gas and oil, although oil producers are already dealing with supply chain problems, limited capital and pressure from investors to increase yields.
Francisco Blanch, managing director and head of global commodities at Bank of America Global Research, also voiced criticism in a segment on Bloomberg Television.
“I don’t think that’s a great idea given the incredibly tense geopolitical world we live in today,” Blanch said. By depleting the reserve, the US could put itself “more in the hands of OPEC+…eventually, it’s just ceding more and more control of the market.”
What to read next
-
‘I just can’t wait to get out’: Nearly three-quarters of pandemic homebuyers have regrets – here’s what you need to know before you do put that offer
-
‘Remarkable reversal’: President Biden just (quietly) reduced student loan forgiveness, and the change could affect up to 1.5 million borrowers. You are one of them?
-
House Democrats Officially Drafted a Bill Banning Politicians, Judges, Their Spouses, and Children From Trading Stocks, But Here’s What They Remain permitted to possess and do
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.