President Biden announced on Thursdaky that his administration will release one million barrels of oil per day from the Strategic Petroleum Reserve. Releases will continue for six months, with the goal a alleviating high energy prices.
This release is the largest withdrawal from the 727 million barrel capacity reserve since it was established in the early 1970s. The Biden administration hopes the potential 180 million-barrel release will alleviate rising gas prices that have largely been caused by Russia’s war in Ukraine.
James Osborne has been following the story from the Houston Chronicle’s bureau in Washington D.C.. He spoke with Texas Standard about what the release will mean for the future of energy companies and for consumer prices. Listen to the interview in the audio player above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: Just how historic is this? The Strategic Petroleum Reserve goes back to the energy crisis of the mid 70s, right?
James Osborne: Right, and the White House is saying this is the biggest release ever. If you remember back in November, they did a pretty big release that was around 50 million barrels and they did with some other countries in Europe. This is going to be one million barrels a day for six months. So if you do the math, that’s one hundred and eighty million barrels over six months. So a far larger release than previously.
The U.S. uses 20 million barrels a day. Will releasing one million barrels a day really have an impact? What might the effects be?
As you noted, it’s a global market and the world uses 100 million barrels a day. So, one million is not very much. That said, you’ve seen the oil prices come down. On Friday, the U.S. oil price was $116 and it’s down below $100 today. And a lot of that comes since word of this announcement got out. There are skeptics out there about how meaningful that this announcement is. But at the same time, the market seemed to like it. And I think right now with oil prices where they are, you are going to see some relief at the pump and weeks to come.
To clarify, the $100 figure you mentioned is the price of a barrel of oil on the floor of the global market?
Could the real goal of this release be to poke at U.S. oil and gas producers to do more to get production up and not just to get gas prices down?
Certainly from the president’s speech yesterday it seemed like he was aiming for that. In addition to this release from the petroleum reserve, he’s also calling on Congress to put a fee on oil and gas companies holding leases that they’re not actively producing from. This is something the oil and gas companies are going to fight rigorously. They’ll make their arguments that they need the non-producing-leases in their portfolio, it’s about flexibility. But Joe Biden doesn’t seem to be having any of it, and he wants to go after them. He’s been pretty pointed in the past too on oil companies potentially manipulating the market, holding back supply. And he continued that yesterday, referencing a CO which he did not name, who had said that they weren’t going to produce any more oil just because the prices were rising and that they were happy with where the market is.
So the Biden administration’s position is be a patriot, do your part, step up and start producing, which will drive down the prices as you have more supply in the marketplace, correct?
Exactly. And the oil companies are sort of using these high prices as a sort of point of leverage. They’re arguing, along with many Republicans in Congress, for Biden’s sort of pull back on some of his climate initiatives – which they see as detrimental to oil and gas production in the future. And they’re not entirely wrong. You certainly have seen a pullback in investment in the oil and gas industry in recent years. How much of that is low prices, prior to recent times, prices were pretty low. If you remember last year, prices went negative for the first time that had ever happened. But there is a general sort of thought among investors and you’re seeing a lot of pushback from Greg Abbott and others in the Legislature. You know, the investors sort of look into the future and say, ‘Well, where is oil and gas going to be in 10, 20 years? Do we really want to park our money in that industry long term?’ And that is no doubt going to cause the companies a lot of headaches as they try to get money out of Wall Street.