- The White House said it would guarantee the purchase of oil from drillers to replenish an emergency stockpile.
- The Strategic Petroleum Reserve is releasing oil at record levels to help lower gas prices.
- Gas prices continue to fall, but largely due to cooling demand for fuel.
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There could be more gas price relief for cash-strapped Americans as the government continues to tap oil from its reserves.
On Tuesday, the Biden administration announced that it would release even more crude oil from the Strategic Petroleum Reserve (SPR) and work to replenish the supply of that SPR. The White House would do this by establishing a federal guarantee to buy oil from some drillers at pre-set prices to help replenish the SPR.
It appears to be an effort to encourage more domestic drilling during a stretch of high gas prices. The Department of Energy will soon introduce a rule to help them do that.
According to the White House statement, more than 125 million barrels of crude have already been sold since the government began its “unprecedented” releases in March, and the reserve is scheduled to release about 180 million barrels in autumn.
A Treasury Department report estimates that the release of crude oil from reserves has pushed gasoline prices down 17 to 42 cents a gallon from where they would be without the federal action.
Gas prices began to rise in late February and early March as the war in Ukraine prompted Biden to ban oil and gas imports from Russia. He said the gas price hike was “Putin’s price hike.” Without Russian imports, the U.S. was under more pressure to produce more oil, and quickly, but the end of the fracking boom meant that wasn’t happening, causing prices to rise. even more. The plan to restock the strategic reserve at fixed prices is intended to influence producers to increase drilling.
For a car-dependent country without widespread adoption of non-oil-based energy, that means Americans’ wallets are being squeezed by rising gas prices. In June, inflation hit a 41-year high; according to the Bureau of Labor Statistics’ Consumer Price Index, rising gas prices fueled nearly half of the rise in inflation.
However, gas prices have been falling for more than a month, the product of a drop in demand. According to the US Energy Information Administration, the price of a gallon reached $4.33 in the week ending July 25. The current average gas price as calculated by AAA is $4.327 a gallon, down from $4.90 a month ago.
“Gas prices have declined an average of 69 cents per gallon over the past 42 days. That’s six straight weeks of declines, and the fastest decline in over a decade!” White House press secretary Karine Jean-Pierre wrote on Twitter.
Patrick De Haan, GasBuddy’s head of oil analysis, wrote on Twitter that 11 states are seeing average prices below $4. However, he is skeptical that the release of crude oil from reserves will be the “key catalyst” leading to the fall in prices.
“Most of the decline is due to the potential for an economic slowdown (increasing interest rates) and the limited improvement in refined product inventories,” as well as the destruction of demand, De Haan tweeted.
“My view is that the launch of the SPR is lowering the ceiling on how oil prices could go, but not necessarily lowering the price of oil.”