US President Joe Biden orders the release of one million barrels of oil a day from the country’s Strategic Petroleum Reserve for six months, in a bid to control soaring energy prices and exert additional pressure on Russia to stop its invasion of Ukraine.
Biden made the formal announcement of the plan Thursday morning, calling the size and scope of the oil release “unprecedented.”
“The world has never had a release of oil reserves at this rate of a million a day for this long,” the White House said. in a report. “This record release will provide a historic amount of supply to serve as a bridge until the end of the year when domestic production increases.”
The United States previously spearheaded a global initiative by friendly nations, including Canada, to release 60 million barrels of oil from reserves. But the impact of that decision did not last, leading to the decision this week to promise another sustained release of oil into the market.
This decision shows how the supply and price of energy has become a key vulnerability for the United States at home and abroad. The price hike has crushed Biden’s approval domestically, while adding billions to Russia’s war chest as he wages war on Ukraine.
At one point in early March, oil was trading at US$130 a barrel. That’s more than double what it was a year ago.
Markets reacted quickly to Thursday’s news, sending the price of US benchmark West Texas Intermediate oil down 3% to US$104 a barrel.
Production stagnates despite soaring prices
Normally, high prices would force growers to pump more, but that didn’t happen this time due to the uncertainty of the ongoing pandemic. The United States produces an average of 11.7 million barrels per day, up from 13 million barrels at the start of 2020. Before the conflict, Russia produced about 10 million barrels of oil per day.
Americans use an average of about 21 million barrels of oil a day, nearly half of which is spent on gasoline, according to the US Energy Information Administration.
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In addition to the barrel release, the White House is asking Congress to impose financial sanctions on oil and gas companies that lease public land but do not produce power.
“Too many companies are not doing their part and choosing to make extraordinary profits and without making additional investments to help supply,” the White House said. “One CEO even acknowledged that even if the price goes to $200 a barrel, they won’t increase production.”
RBC commodity strategist Helima Croft said the move was a continuation of the “tough stance” the US administration has taken in the face of a suddenly belligerent Moscow.
“It will be important to see whether this release announcement will be an effective shock and awe tactic given that Russian energy losses are likely to increase as the military campaign intensifies and the humanitarian crisis in Europe escalates. worse,” she said.