President Joe Biden announced on March 31 that the United States will release an unprecedented 180 million barrels of oil from the nation’s Strategic Petroleum Reserve (SPR) over the next several months.
The oil will be put out into the market at a pace of 1 million barrels per day on average for the next six months starting in May, and this will come in concert with releases from other countries around the world, according to a senior administration official on a call with reporters ahead of the president’s announcement.
The administration plans to restock the reserves when oil prices come down, “to prepare for future emergencies, and also to provide the right signal to the market,” a senior administration official said.
News of the announcement caused oil prices to take a plunge on March 31 while the oil-producing nations of OPEC+, which includes Russia, stuck to their existing deal for May output of 432,000 barrels per day.
U.S. West Texas Intermediate futures for May delivery fell $6.06, or 5.62 percent, to $101.76 per barrel, off a low of $100.16.
U.S. gas prices remain elevated at an average of $4.225 per gallon—down slightly from the record high of $4.331 reached on March 11, according to the American Automotive Association.
This marks the third time the Biden administration has tapped into the SPR in the past six months, and it will be the largest release in the reserve’s nearly 50-year history.
To date, the administration has released 90 million barrels of oil from the reserve. The United States consumes an average of about 20 million barrels of oil per day.
Phil Flynn, a senior account executive at The Price Futures Group and author of The Energy Report, refers to Biden’s move as a “desperate measure” in his daily blog on energy markets, noting that it comes on the same day OPEC+ will ignore Biden’s call to up production.
“So what a coincidence that Biden announced the biggest release from the SPR ever on the day that OPEC is going to shun the Biden administration by sticking to their 400,000 barrel a day script,” Flynn wrote. “Yet OPEC will laugh it off. They know that this move will only increase the demand for their product. They also know that it will further encourage less U.S. oil production as it will discourage oil investment in shale.”
On March 8, Biden announced a ban on Russian energy imports as part of a list of U.S. sanctions meant to isolate Russia’s economy in response to its military invasion of Ukraine.
Gas prices have been on the rise since dropping below $2 per gallon during the COVID-19 lockdown measures in 2020. Those increases have accelerated since around the start of 2022 as Russian tensions with Ukraine escalated and Russia later invaded.
Some in Congress have called for Biden to allow for leases of federal land to allow for greater domestic oil production.
Biden signed an executive order during his first days in office, putting a halt to new fossil fuel drilling leases, prioritizing goals that were meant to “mitigate climate change.”
Still, the White House has repeatedly denied that its policies are limiting oil production, pointing to an increase in production compared to President Donald Trump’s first year in office and 9,000 unused permits for oil companies to drill on federal land.
On March 31, officials renewed calls for oil companies to “step up” production.
“We do think that there should be consequences if you’re sitting on unused, approved permits for production on federal lands and also undeveloped acres of land that have been leased,” a senior administration official said on March 31.
“That’s why the president will today call for a use-it-or-lose-it policy that will charge companies if they’re sitting on wells that aren’t producing and leases that they’re not developing.”
On March 8, American Petroleum Institute spokesman Kevin O’Scannlain called the White House’s argument on nonproducing leases “a red herring, a smokescreen for energy policies that have had a hamstringing effect” on U.S. natural gas and oil production.
O’Scannlain said the “use-it-or-lose-it” requirements that oil companies produce gas or return leases to the federal government are already in place. He also noted the significant time and financial investment needed to lease land and search for oil, as well as federal limits on companies locking up excess unproductive land.
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