Joe Biden orders officials to prepare for more emergency oil releases

President Joe Biden ordered officials to prepare for more releases from the US Strategic Petroleum Reserve as he authorized the sale of 15 million barrels of oil in December and outlined a plan to replenish dwindling emergency supplies.

Senior government officials said Tuesday night Biden would make the announcements during a speech on Wednesday about his efforts to tame high gasoline prices, which are a political obligation for Democrats ahead of next month’s midterm elections.

After falling sharply in the summer, prices at the pump have risen slightly again in recent weeks. At just under $4 a gallon, prices are almost 60 percent higher than when Biden took office in January 2021.

Selling another 15 million barrels by the end of the year completes the release of the 180 million barrels Biden planned to inject into the market in March, but the White House has also reserved the option of future intervention if gasoline prices rise.

A senior administration official said Tuesday the president has instructed his top business and energy officials to be in a “high state of readiness” and to prepare for the potential sale of additional barrels of oil above the 180 million mark, if necessary, a signal to markets and Oil producing nations that the US will attempt to impose a cap on the price of crude oil.

“We remain very capable, very vigilant: if we have to deal with additional supply and affordability challenges, the SPR gives us additional opportunity if we need to make more sales in the future beyond this December period,” a said another senior administration official.

The move comes after a decision by Opec+ countries to curb oil production, which sparked a furious reaction in Washington by threatening to hike prices amid runaway inflation.

The “continuation” of US releases — part of the larger month-long 180 million stock divestment — was designed as a “bridge” until oil production from the US and elsewhere picks up again, officials said.

But analysts have warned that US supply growth has remained sluggish, and Wall Street has urged shale companies to take advantage of higher oil prices to pay hefty dividends rather than embark on costly drilling campaigns.

Oil analysts said the bid release was designed to send a signal to action for gasoline prices but would have limited impact on global oil market balances.

“After the Opec meeting and looking towards the mid-term, the administration had to do something – and that appears to be the announcement of more SPR kegs that were already planned,” said Amrita Sen, research director at consultancy Energy Aspects.

US oil production remains about 1 million barrels per day below the 2019 peak.

The SPR has emerged as the main tool Biden has used this year to attempt to tame gasoline prices as they have soared in response to high demand and supply disruptions, including the impact of the Russian war in Ukraine. In August, Biden hailed the “fastest decline [in petrol prices] in over a decade” after months of SPR releases and a sell-off in international crude markets.

But the government’s confidence in the SPR has come under fire from Republicans who argue it has fallen to dangerously low levels. The reserve contained 409 million barrels of crude oil in the first week of October, the lowest level since 1984, according to the latest figures from the Energy Information Administration.

The White House on Tuesday also announced a reserve replenishment mechanism to prevent it from being depleted and to reassure domestic oil producers that the government is eyeing a floor on oil prices.

It said the SPR would buy oil if it fell to $67-$72 a barrel in spot deals, but would also enter into contracts to buy it based on its forward price on the futures market. US oil prices were around $83 a barrel ahead of Tuesday’s announcement.

“It sends a signal that the US is a buyer at this price, bringing demand into the market at this price and reducing the risk that a number of producers and others have articulated – that they are concerned if oil prices increase.” falling fast, they’re just going to fall steep,” said the first senior administrator. “That should give people even more confidence to invest.”

White House officials also signaled that Biden would be more forceful in urging US oil companies to cut retail gasoline prices: One said oil companies normally make 90 cents on a gallon of gasoline, but today it’s between $1.30 and $1.40 .

“It’s on energy companies not to keep making record profits on every gallon of gasoline when they could help. . . bring down [prices]’ the officer added.