Fifty million barrels of oil will be released from the nation’s strategic reserve in a bid to lower soaring energy prices and help rein in inflation, the White House announced Tuesday.
During the next several months, 32 million barrels will be released from the Strategic Petroleum Reserve. That’s on top of another 18 million barrels that Congress already had authorized for release. The stockpile eventually will be replaced, the Biden administration said.
Fuel prices have soared to levels not seen in years, with the national average for a gallon of self serve regular now up about $1.30 more than a year ago, according to tracking service GasBuddy.com. But even before the White House announcement, motorists were starting to get some relief, pump prices falling for the second week in a row.
“American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand as the global economy emerges from the pandemic,” the White House said in a statement. “That’s why President Biden is using every tool available to him to work to lower prices and address the lack of supply.”
The U.S. isn’t alone. The administration worked with a number of other energy-consuming nations, including China, India, Japan, Korea and the UK, all of which will release some strategic oil reserves.
Gas prices have surged across the country and, in some locales like California and Hawaii, are averaging nearly $4.75 a gallon. The last time motorists paid this much was in mid-2014.
Crude oil prices collapsed during the pandemic, at one point falling into negative territory when the U.S. ran out of places to store imported oil. In turn, motorists in some parts of the country saw pump prices drop to under $1 a gallon.
But, as COVID lockdowns ended and more and more Americans took to the road, crude prices soared. Adding to the upward pressure was the decision by OPEC not to return to pre-pandemic levels of production.
Crude oil slips back
Crude prices hit a peak of around $85 a barrel earlier this month but have since tumbled by as much as $10.
“With oil prices plunging nearly $10 from the recent peak of $85 per barrel, motorists will start to see gas prices decline nationwide, just in time for Thanksgiving, and the decline could stretch for several weeks,” Patrick De Haan, head of petroleum analysis for GasBuddy, said in a research report released Monday. “It’s not impossible- so long as oil prices hold near these levels or continue falling- that the national average could shed 15 to 30 cents per gallon over the coming weeks, while some areas like California could see declines of as much as 25 to 40 cents.
De Haan warned that fuel prices will remain fluid, and a surge in global COVID cases appears to be increasing downward pressure. He also said moves like the one the Biden administration announced Tuesday will be critical to holding off further hikes in oil prices.
Upward pressures continue
But there remains significant upward pressure. As of late morning, both West Texas Intermediate and Brent Crude — two benchmarks — were up more than 2% for the day, showing little impact from the White House announcement.
The surge in fuel costs this year has harshly impacted the economy, helping drive one of the biggest increases in inflation seen in decades. More immediately, only about 32% of Americans say they plan to drive for the Thanksgiving holiday, with gas prices cited as a key reason. By comparison, 65% of Americans reported hitting the road in 2019.