How the use of Petroleum Energy Reserve will affect US gasoline prices
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Gasoline prices remain high compared to previous months, and President Jod Biden is pursuing a strategy to help drivers. Biden will allocate 1 million barrels of oil from the strategic reserve in the hope of slightly reducing the cost of gasoline.
US President Joe Biden said he would release 1 million barrels of oil per day from the US Strategic Petroleum Reserve over the next six months. The unprecedented recall could lower gasoline prices by 10 to 35 cents a gallon in the coming weeks, according to the White House.
Gasoline prices remain high and could rise
After a record high in early March, gas prices continue to fall. The average gas station price on Friday was about $4.22 a gallon, according to AAA data, down 2 cents from the previous week. But even that is well above the $3.62 average just a month ago. YU.
What is a Strategic Oil Reserve?
It is administered by the Department of Energy and is the national oil reserve for emergencies. The reserve was created by President Gerald Ford after the 1973 oil crisis, when the OPEC countries placed an embargo on the US because of their support for Israel.
At its peak in 2009, strategic oil reserves held more than 720 million barrels in four huge underground caverns in Texas and Louisiana along the Gulf of Mexico.
Biden released 50 million barrels in November 2021, and then in early March, the United States and other members of the International Energy Agency released 60 million barrels of oil from their reserves.
Biden to release 180 million barrels of oil
On Thursday, Biden announced that the United States would release another 180 million barrels over the next six months to make up for higher prices and limited supply. This will cut inventories to less than 390 million barrels, the lowest level in four decades.
But experts say it won't move the needle much: Mike Sommers, executive director of the industry trade organization, the American Petroleum Institute, said the recall is "far from a long-term solution."
“This will slightly lower the price of oil and increase demand,” Scott Sheffield, CEO of Texas oil company Pioneer Natural Resources, told The New York Times. "But it's still a band-aid with a significant supply shortage."
What else is the government doing to lower gasoline prices?
The White House is also putting pressure on US oil companies to increase drilling and production. In a statement Thursday, the administration criticized energy concerns for "dealing" with more than 12 million acres of federal land and 9,000 approved production permits. Biden said he would like companies to be fined if they leave leased wells on public land unused.
There is also the option of obtaining energy products from other sources. The United States is working to improve relations with Venezuela, which has been barred from selling oil to the US since 2018, and is negotiating with Iran a new nuclear non-proliferation treaty that would bring Iranian oil back to the market.
Separately, similar measures are being considered by Connecticut, the United States and at least 20 other states. A bill in Congress would remove the federal fuel tax, although it faces stiff competition.
Will the gas rise again?
Analysts say drivers should expect another surge as companies switch to gasoline blends in the summer. During warm weather months, the gasoline formula changes to prevent excessive evaporation. These summer mixes are more expensive to process and distribute, and can cost 25 to 75 cents more than winter mixes.
The EPA requires stations to sell 100% summer gasoline by September 15th. This, along with the war in Ukraine, more people returning to the office, and other current factors will affect everything from transportation costs to Uber prices.
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