Biden uses oil reserves for 6 months to control gas prices – Daily Local

Zick Miller and Josh Buk

WASHINGTON (AP) – President Joe Biden has ordered 1 million barrels of oil a day from the country’s strategic oil reserves for six months, the White House said Thursday, seeking to control energy prices that have risen since the United States and allies introduced sanctions against Russia in connection with its invasion of Ukraine.

The White House said Biden wants Congress to impose financial penalties on oil and gas companies that lease state lands but are not engaged in production. It also intends to use the Defense Manufacturing Act to encourage the extraction of important minerals for batteries in electric vehicles, which is part of a broader push to move to cleaner energy sources and reduce fossil fuel use.

Actions show that oil remains a vulnerable place for the United States. High prices have damaged Biden’s domestic approval and added billions of dollars to the Russian government for oil exports when it is at war with Ukraine.

Leaking stocks will create pressure that could lower oil prices, although Biden has twice ordered a release from stocks without causing a significant shift in oil markets.

Part of Biden’s concern is that high prices have not yet caused a significant jump in oil production. The planned release is a way to increase supplies as a bridge until oil companies build up their own production, with administration officials estimating that domestic production will grow by 1 million barrels per day this year and an additional 700,000 barrels per day in 2023.

Markets reacted quickly: in trading on Thursday, crude oil prices fell by about 4% to $ 104 per barrel. However, oil rose from about $ 60 a year ago, and supplies are not in line with demand as the global economy begins to recover from the coronavirus pandemic. This inflation problem has been exacerbated by Russian President Vladimir Putin’s invasion of Ukraine, which has created new uncertainty over oil and natural gas supplies and led to retaliatory sanctions from the United States and its allies.

Stuart Glickman, an oil analyst at CFRA Research, said the publication would bring short-term price relief and would be similar to “making Advil a headache.” But ultimately markets will look to see if the main problems that led to Biden’s decisions remain after the cessation of releases.

“The main cause of the headache will probably still be there after the medication is over,” Glickman said.

Biden negotiated with allies and partners to join additional oil supplies so that the world market received more than 180 million barrels promised by the United States

Americans use an average of about 21 million barrels of oil daily, about 40% of which is gasoline, according to the U.S. Energy Information Administration. This total is about one-fifth of total world oil consumption.

Domestic oil production accounts for more than half of U.S. consumption, but high prices have not forced the company to return to production levels before the pandemic. The United States produces an average of 11.7 million barrels per day compared to 13 million barrels in early 2020.

Republican lawmakers said the problem was the result of the administration’s hostility to oil permits and the construction of new pipelines such as Keystone XL. Democrats say the country needs to switch to renewable energy sources such as wind and solar, which could reduce dependence on fossil fuels and Putin’s leverage.

Sen. Steve Danes, R-Mt., Accused Biden of using the reserve without first steps to increase energy production in America, calling it a “bullet wound patch.”

Danes called Biden’s actions “desperate steps” to avoid what he called a genuine solution: “investing in American energy production” and returning “oil and gas on lease.”

The administration says that the increase in oil production is a gradual process, and the release will give time to increase production. He also wants to stimulate increased production by introducing fees for unused leases of public land, which requires congressional approval.

According to a poll published last week by the Dallas Federal Reserve, oil producers were more focused on meeting the needs of investors than consumers. About 59% of executives surveyed said pressure from investors to maintain “capital discipline” amid high prices was the reason they didn’t pump more, while less than 10% blamed government regulation.

A permanent release from reserves would be a significant amount and would be close to eliminating the gap in domestic production compared to February 2020, before the coronavirus caused a sharp decline in oil production.

However, oil policy is complex, as industry supporters and environmentalists criticize the planned release. Groups like the American Petroleum Institute want to ease drilling, while environmental organizations say energy companies should be forced to pay a special surplus tax.

The administration in November announced the release of 50 million barrels from the strategic reserve in coordination with other countries. And after the Russian-Ukrainian war began, the United States and 30 other countries agreed to produce an additional 60 million barrels of reserves, with half of the total coming from the United States

According to the Ministry of Energy, which manages it, as of March 25, the reserve contained more than 568 million barrels of oil. After the release, the government will start replenishing stocks as soon as prices fall enough.

News of the administration’s plans was first reported by Bloomberg.

___

Associated Press authors Alex Weig, Matthew Daly and Michael Balsam contributed to this report.