The United States and five other world powers announced a coordinated effort to tap into their national oil stockpiles on Tuesday, attempting to drive down rising gas prices that have angered consumers around the world.
The move appeared to underwhelm oil traders, who had been expecting President Biden to announce a larger release from America’s Strategic Petroleum Reserve, which is the biggest in the world with 620 million barrels. The price of a barrel of crude oil actually rose after the announcement in global trading, although administration officials said prices could fall in coming weeks.
The market reaction underscored the difficulties Mr. Biden faces, both politically and economically, in his efforts to react to the fastest increase in U.S. inflation in three decades. The president has seen his approval ratings slump as gas and food prices have risen, while Republicans have launched a steady series of attacks blaming Democrats.
Mr. Biden has shifted his messaging on the issue in recent weeks, in hopes of showing consumers he understands their financial pain. On Tuesday at the White House, he cast the release of oil from the strategic reserve as an important step toward lowering fuel costs for drivers at the start of the holiday travel season.
“Today we’re launching a major effort to moderate the price of oil, an effort that will span the globe and ultimately reach your corner gas station, God willing,” Mr. Biden said.
“While our combined actions will not solve the problem with high gas prices overnight, they will make a difference,” he said. “It will take time, but before long you should see the price of gas drop where you fill up your tank.”
Earlier on Tuesday, administration officials said Mr. Biden had ordered the Energy Department to tap into 50 million barrels of crude in the Strategic Petroleum Reserve. Traders had been expecting 100 million barrels, said Richard Bronze, head of geopolitics at Energy Aspects, a market research firm in London.
Britain said it would authorize the release of up to 1.5 million barrels and India said it would release five million. Mr. Bronze estimated that Japan and South Korea would each add four million to five million barrels. China did not announce details of its plans.
The concerted effort, the largest ever for a release of strategic reserves across multiple countries, is meant to address fluctuations in supply and demand for oil, administration officials said. And it was a shot across the bow of OPEC Plus, the name for the Organization of the Petroleum Exporting Countries as well as Russia and other countries. Mr. Biden has pushed those countries to increase production, but has been rebuffed.
The move could bring a response next week when the group holds its monthly meeting. While it could prompt those countries to increase production, it could just as easily push the cartel to restrict supply further and push global prices higher.
In recent monthly meetings, OPEC Plus has stuck with plans to increase production by a relatively modest 400,000 barrels a day each month. U.S. officials sidestepped a question about possible retaliation from OPEC Plus. The officials said they had pushed oil producers to announce their own supply increases for weeks and made clear to those nations that Mr. Biden and other world leaders were considering emergency releases of their own. They said Mr. Biden would have preferred a parallel release that included more oil-producing countries.
The price of oil has fallen since late October partly in anticipation that countries would take action to try to tame energy costs. The U.S. benchmark, West Texas Intermediate, immediately jumped after the administration’s announcement, and was trading 1.3 percent higher for the day. So far this month, the price had dropped 4.75 percent.
Demand for oil fell precipitously in the early months of the pandemic, so oil-producing nations cut output. In the United States, reduced demand led to a substantial decline in drilling; the country’s number of active oil rigs was down nearly 70 percent in summer 2020.
As prices rose in recent months, Mr. Biden looked for ways to show he was trying to tame prices, including asking the Federal Trade Commission to investigate possible illegal conduct by large oil companies in the national gasoline market. The president has pushed oil producers to ramp up supply even as he urges the U.S. and other countries to wean themselves from fossil fuels over the long term to avert catastrophic global warming.
On Tuesday, Mr. Biden said his environmental agenda was not contributing to the recent price increases at the pump.
“My effort to fight climate change is not raising the price of gas,” he said.
The emergency stockpile that Mr. Biden tapped is stored in underground caverns in Texas and Louisiana. It was established after the 1973-74 oil embargo by Arab members of the Organization of the Petroleum Exporting Countries, and has been tapped in emergencies like the buildup to the Persian Gulf war in 1991 and the aftermath of Hurricane Katrina in 2005, when much of the Gulf of Mexico oil infrastructure was damaged. The reserve is also used to exchange or lend oil to refineries when accidents or storms block shipping channels.
Most experts believe a release could eventually lower prices modestly, but only for a short time because oil prices are set globally and world consumption averages roughly 100 million barrels a day. The average price for a gallon of regular gasoline in the United States rose to $3.40 on Tuesday from $2.11 a year ago, according to AAA, the travel services organization. But gas prices have started to level off in the past week.
Several recent presidents have ordered releases from America’s strategic reserves, including Mr. Bush; his father, George H.W. Bush; Bill Clinton; and Barack Obama.
But research suggests the effect on gas prices, for the most part, is modest at best — underscoring how gas prices are largely outside a president’s control.
Mr. Obama’s administration led the most recent coordinated global release of oil reserves in June 2011, when the United States and 27 other nations released 60 million barrels of reserves to replace lost production from Libya that was halted by political turmoil in the North African country. Of the total amount of oil released, about half came from reserves in the United States, with the rest from the other 27 industrialized nations that belonged to the International Energy Agency.
Understand Rising Gas Prices in the U.S.
Biden administration officials said the coordinated effort announced on Tuesday would come in two parts: a loan of 32 million barrels over several months to refineries and the accelerated sale of 18 million barrels, which has already been congressionally authorized.
Britain will be allowing companies to voluntarily release their oil reserves. If every company takes advantage of the option, it would amount to 1.5 million barrels, a British government representative said.
Helima Croft, head of global commodities at RBC Capital Markets, an investment bank, said OPEC Plus could choose to respond at its next meeting, on Dec. 2.
“If OPEC wants to be obstructionist, they can blunt the impact” of the oil release, she said, by not approving the next monthly 400,000 barrels-a-day production increase at the meeting.
On the other hand, she added, doing that would “expose them to a lot of problems in Washington,” potentially including an antitrust bill in Congress aimed at OPEC, known as NOPEC, that could call for going after the financial reserves of countries like Saudi Arabia and the United Arab Emirates. “I think it would be a nuclear option and OPEC won’t want to go down that path,” she said.
Robert McNally, president of Rapidan Energy Group, a market research firm and a former energy adviser in George W. Bush’s White House, said Tuesday’s announcement “may be politically smart, but I don’t think it is smart in terms of policy and will likely backfire.”
“There are good odds that OPEC Plus will offset this, and they have a bigger fire hose than we do,” he said. “Using strategic stocks to defend an oil price level set in a global market is pure folly.”
Republicans including Representative Kevin McCarthy of California, the House minority leader, criticized Mr. Biden and blamed the White House for inflation.
In a tweet, Mr. McCarthy said the decision to tap America’s strategic reserves “is a crass political ploy just 3 days ahead of Thanksgiving.”
Democrats in Congress, including the Senate majority leader, Chuck Schumer, have recently called for Mr. Biden to take action to provide immediate relief for Americans.
Jennifer M. Granholm, the secretary of energy, cautioned Tuesday against expecting an immediate, dramatic drop in gas prices. When asked when Americans might see lower prices, Ms. Granholm made no promises: “It won’t be tomorrow,” she said.
Eshe Nelson and Clifford Krauss contributed reporting.
(With inputs from NYTimes)
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