President Joe Biden announced on Tuesday that he would tap the U.S. Strategic Petroleum Reserve (SPR) for 50 million barrels of oil, but that won’t last long.
The U.S. Energy Information reported, “In 2020, the United States consumed an average of about 18.19 million barrels of petroleum per day, or a total of about 6.66 billion barrels of petroleum.”
Biden said 32 million barrels “will be an exchange over the next several months, releasing oil that will eventually return to the Strategic Petroleum Reserve in the years ahead,” with the other 18 million authorized for sale via Congress. That means the total amount of oil tapped will be just over 2.5 days worth.
Oil prices have soared to seven-year highs and U.S. retail gasoline cost have hit an average of $3.42 a gallon, also the highest in seven years.
Tapping the reserve doesn’t solve the production problem. “Analysts have warned an SPR release would only produce a short-term effect in the market, as it would not increase U.S. production capacity,” Reuters wrote.
On Tuesday, the White House said China, India, Japan, South Korea, and the United Kingdom will also tap into their petroleum reserves as part of a coordinated effort. “This culminates weeks of consultations with countries around the world, and we are already seeing the effect of this work on oil prices. Over the last several weeks as reports of this work became public, oil prices are down nearly 10%,” the White House said.
Biden’s move drew praise from senior Democrats, including Senate Majority Leader Chuck Schumer (D-NY).
“President Biden’s announcement is good news for American families and will strengthen our economy,” Schumer said. “Tapping the SPR will provide much-needed temporary relief at the pump and will signal to OPEC that they cannot recklessly manipulate supply to artificially inflate gas prices. Of course, the only long-term solution to rising gas prices is to continue our march to eliminate our dependence on fossil fuels and create a robust green energy economy.”
Prices at the pump have been rising steadily since Biden took office. But GasBuddy.com, a price-tracking website, said Monday that gas prices have fallen for two straight weeks to an average of $3.39 per gallon. Still, gas is $1.30 per gallon higher than a year ago, the site said.
“While there’s reason to be optimistic that the peak of gas prices will soon be behind us, the decline in the price of oil is likely reflecting the possibility of a coordinated global release of oil from strategic reserves,” Patrick De Haan, head of petroleum analysis for GasBuddy, said ahead of Biden’s announcement.
And supply is also dwindling.
“According to data from the Energy Information Administration last week, U.S. crude oil inventories fell 2.1 million barrels and stand 7% below the five year average for this time of year, while domestic crude oil production also saw a slight drop to 11.4 million barrels per day,” GasBuddy reported.
“Gasoline inventories fell by a slight 700,000 barrels and stand 4% below the five year average range, while distillate inventories also declined by 800,000 barrels and stand 5% below the five year average range. Implied gasoline demand, a proxy for retail gasoline demand, fell 18,000bpd to 9.24 million barrels per day. Refinery utilization continued to rally, posting a rise of 1.2 percentage points to 87.9% nationally,” the website added.
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