- The White House said it would guarantee the purchase of oil from drillers to replenish an emergency reserve.
- The Strategic Petroleum Reserve releases oil at record levels to help lower gasoline prices.
- Gasoline prices continue to fall, but that’s largely due to cooling fuel demand.
Further relief in gasoline prices could be on the way for cash-strapped Americans as the government continues to draw oil from its stockpiles.
On Tuesday, the Biden administration announcement this would release even more crude oil from the Strategic Petroleum Reserve (SPR) – and work to replenish that SPR’s supply. The White House would do this by establishing a federal guarantee to buy oil from certain drillers at predefined prices to help replenish the SPR.
This appears to be an effort to encourage more domestic drilling during a time of high gas prices. The Department of Energy will soon come up with a rule to help them do this.
According to the White House statement, more than 125 million barrels of crude oil have already been sold since the government began its “unprecedented” releases in March, and the reserve is expected to release about 180 million barrels by then. ‘fall.
A rPort of the Treasury Department estimates that the release of crude oil from reserves has lowered gasoline prices by about 17 to 42 cents per gallon from what they would be without the federal action.
Gas prices began to soar in late February and early March as the war in Ukraine guest Biden bans oil and gas imports from Russia. He said the gas price spike was “Putin’s price hike”. Without Russian imports, the United States was under more pressure to produce more oil, and quickly – but the end of the hydraulic fracturing boom meant that this was not happening, causing prices to rise even further. The fixed-price strategic reserve replenishment plan aims to incentivize producers to ramp up drilling.
For a car-dependent country without widespread adoption of non-petroleum-based energy, that means Americans’ wallets are being squeezed by soaring gasoline prices. In June, inflation reached a 41 years; according to Bureau of Labor Statistics Consumer Price Indexsoaring gasoline prices fueled almost half of the rise in inflation.
However, gasoline prices have been falling for more than a month, the product of a drop in demand. According to US Energy Information Administrationthe price per gallon hit $4.33 for the week ending July 25. The current average gas price calculated by AAA is $4.327 per gallon, up from $4.90 a month ago.
“Gasoline prices have fallen an average of 69 cents per gallon over the past 42 days. That’s six straight weeks of declines – and the fastest decline in more than a decade!” White House press secretary Karine Jean-Pierre wrote about Twitter.
Patrick De Haan, Head of Petroleum Analysis at GasBuddy, wrote about Twitter that 11 states are seeing average prices below $4. However, he is skeptical that the release of crude oil from reserves is the “key catalyst” leading to the price drop.
“Most of the decline is due to the potential for an economic slowdown (higher interest rates) and limited improvement in refined product inventories,” as well as demand destruction, De Haan tweeted.
“My view is that the SPR release lowers the ceiling on how oil prices might move, but not necessarily lowering the price of oil.”