US to release 50m barrels of oil to ease energy costs

(Joe Giddens/PA)

US President Joe Biden has ordered 50 million barrels of oil released from the strategic reserve to help bring down energy costs, in co-ordination with other major energy consuming nations, including China, India and the UK.

The move is aimed at global energy markets, but also at voters who are coping with higher inflation and rising prices ahead of Thanksgiving and winter holiday travel.

Fuel prices are at about 3.40 dollars (£2.55) a gallon, more than double the price a year ago, according to the American Automobile Association.

Mr Biden has scrambled to reshape much of his economic agenda around the issue of inflation, saying that his recently passed trillion-dollar infrastructure package will reduce price pressures by making it more efficient and cheaper to transport goods.

It does not take an economic expert to know that’s a problem

Republican legislators have criticised the administration for inflation hitting a 31-year high in October.

Senate Republican leader Mitch McConnell tore into the administration over inflation in a speech last week, saying the victims of higher prices were middle class Americans.

“The three biggest drivers of the staggering 6.2% inflation rate we logged last month were housing, transportation and food,” he said. “Those aren’t luxuries, they’re essentials, and they take up a much bigger share of families’ budgets from the middle class on down.”

The Strategic Petroleum Reserve is an emergency stockpile to preserve access to oil in case of natural disasters, national security issues and other events.

Maintained by the Energy Department, the reserves are stored in caverns created in salt domes along the Texas and Louisiana Gulf Coasts. There are roughly 605 million barrels of sweet and sour petroleum in the reserve.

“As we come out of an unprecedented global economic shutdown, oil supply has not kept up with demand, forcing working families and businesses to pay the price,” energy secretary Jennifer Granholm said in a statement.

“This action underscores the president’s commitment to using the tools available to bring down costs for working families and to continue our economic recovery.”

The Biden administration has argued that the supply of oil has not kept pace with demand as the global economy emerged from the pandemic, and the reserve is the right tool to help ease the problem.

Americans used an average of 20.7 million barrels a day during September, according to the Energy Information Administration. That means the release nearly equals about two-and-a-half days of additional supply.

The decision came after weeks of diplomatic negotiations and the release will be taken in parallel with other nations. Japan and South Korea are also participating.

The US Department of Energy will make the oil available from the Strategic Petroleum Reserve in two ways: 32 million barrels will be released in the next few months and will return to the reserve in the years ahead, and 18 million barrels will be part of a sale of oil that Congress had previously authorised.

White House press secretary Jen Psaki said the White House would also keep tabs on the oil companies.

“We will continue to press oil companies who have made record profits and are overseeing what we consider to be price gouging out there when there’s a supply of oil or the price of oil is coming down and the price of gas is not coming down,” she said.

“It does not take an economic expert to know that’s a problem.”