President Joe Biden ordered release of some 50 million barrels of oil from U.S. strategic reserves Tuesday, hoping to drive down consumer gas prices as production controls by oil producing nations have led to higher costs.
AAA reports the national average gas price hovered just above $3.40 per gallon on Tuesday, 50% higher than a year ago.
But holiday travelers are not likely to see any significant impacts until well after Thanksgiving, as reserves won’t reach markets until mid- to late December.
Biden’s decision to tap national reserves was made in coordination with China, India and the United Kingdom according to the administration.
As word spread in recent days of a coming joint release from U.S. and other countries’ reserves, there were warnings from OPEC Plus members that their response could include reneging on promises to increase supplies in coming months.
OPEC Plus is the name for the Organization of Petroleum Exporting Countries along with Russia and other countries that collectively control over 50% of global oil supplies.
The move comes amid rising concerns about U.S. inflation rates, which saw a record jump of 6.2% in October, the highest year-over-year increase in over three decades.
Following release of October inflation data, Gardner Public Finance Senior Fellow Phil Dean told the Deseret News that inflation concerns have become a forward issue for Utah families.
“More than any other time in many decades, (inflation) has become a kitchen table discussion,” Dean said. “People at home are seeing inflation, they’re experiencing it and they’re worrying about it.”
Dean also noted for families with lower incomes, who spend a bigger percentage of their earnings on basic necessities, the rise in prices is a much more difficult burden than for those higher up the income scale.
“Those at the lower end of the economy, in particular, are feeling those effects,” Dean said. “Putting food on the table, filling their cars with gas ... those costs are hitting the lower end of the economic spectrum the hardest.”
Republican lawmakers have hammered the administration on rising consumer costs as Biden has scrambled to reshape much of his economic agenda around the issue of inflation, saying that his recently passed $1 trillion infrastructure package will reduce price pressures by making it more efficient and cheaper to transport goods.
Senate Republican Leader Mitch McConnell tore into the White House in a floor 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,” the Kentucky senator 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 U.S. 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, the White House said. Another 18 million barrels will be part of a sale of oil that Congress had previously authorized.
White House Press Secretary Jen Psaki said Monday evening that the White House would also keep tabs on the oil companies, too.
“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,” Psaki said. “It does not take an economic expert to know that’s a problem.”
Contributing: Associated Press