President Joe Biden is ordering the release of up to 1 million barrels of oil per day from the nation's strategic petroleum reserve in a bid to control energy prices that have spiked as the U.S. and allies have imposed steep sanctions on Russia over its invasion of Ukraine.
The White House said the president is also calling on Congress to impose financial penalties on oil and gas companies that lease public lands but aren’t producing. And he intends to invoke the Defense Production Act to encourage the mining of critical minerals for batteries in electric vehicles, part of a broader push to shift toward cleaner energy sources and reduce the use of fossil fuels.
High oil prices have not coaxed more production, creating a challenge for President Biden. The Democratic president has seen his popularity sink as inflation reached a 40-year high in February and the cost of petroleum and gasoline climbed after Russia invaded Ukraine.
The markets reacted quickly to news of the likely release from the strategic reserve with crude oil prices dropping 6% on Thursday morning to roughly $101 a barrel. Still, oil is up from roughly $60 a year ago as supplies have not kept up with demand as the world economy began to rebound from the coronavirus pandemic.
Americans on average use about 21 million barrels of oil daily, with about 40% of the consumption devoted to gasoline, according to the U.S. Energy Information Administration.
Domestic oil production is equal to more than half of the country's usage, but high prices have not led companies to return to their pre-pandemic levels of output. The U.S. is producing on average 11.7 million barrels daily, down from 13 million barrels in early 2020.
Oil producers have been more focused on meeting the needs of investors than consumers, according to a survey released last week by the Dallas Federal Reserve. About 59% of the executives surveyed said investor pressure to preserve “capital discipline” amid high prices was the reason they weren’t pumping more, while fewer than 10% blamed government regulation.
The Biden administration in November announced the release of 50 million barrels from the strategic reserve in coordination with other countries. And after the Russia-Ukraine war began, the U.S. and 30 other countries agreed to an additional release of 60 million barrels from reserves, with half of the total coming from the U.S.
According to the Department of Energy, which manages it, more than 568 million barrels of oil were held in the reserve as of March 25.
Additional reporting by The Associated Press.