The U.S. will release 1 million barrels of oil per day from its strategic reserves to help cut gas prices and fight inflation across the country, the White House announced Thursday.
President Joe Biden plans to tap the nation’s Strategic Petroleum Reserve for the next six months as domestic producers ramp up production, according to a fact sheet released by the Biden administration.
“The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time,” the White House said in a release. “This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up.”
A senior administration official told reporters Thursday morning that, in combination with similar actions in other countries, the average daily amount released from global strategic reserves should exceed 1 million barrels.
Oil prices dropped Thursday after reports surfaced Wednesday evening suggesting such a move was imminent.
International benchmark Brent crude futures for May fell 4% to trade at $108.89 per barrel. U.S. crude futures slid 4.7% to $102.84. Earlier in the session the contract traded as low as $100.16.
The announcement comes as the White House looks for ways to combat a spike in energy prices caused by Russia’s invasion of Ukraine. While oil prices are well off highs seen earlier this year, the geopolitical chaos has continued to elevate petroleum costs and stir fears about oil and natural gas availability.
Biden later remarked on the administration’s efforts to cool oil prices and blamed Russian President Vladimir Putin for the most recent spike in energy costs.
“Many people are no longer buying Russian oil around the world. I banned Russian-imported oil here in America, Republicans and Democrats in Congress called for it and support it. It was the right thing to do,” Biden said.
“But as I said at the time, it’s going to come with a cost,” the president added. “As Russian oil comes off the global market, supply of oil drops, and prices are rising. Now Putin’s price hike is hitting Americans at the pump.”
The recent rise in crude prices has led to a jump in domestic gasoline prices, with the national average price of a gallon of gas at $4.23, up from $2.87 a year ago. That jump has contributed to a broader rise in the prices consumers pay for all goods and services, and a 7.9% increase in year-over-year inflation.
Roger Read, senior energy analyst at Wells Fargo Securities, noted that Biden’s planned daily release from the SPR is about 1% of daily global production and 5% of U.S consumption.
“I don’t want to make it sound like it’s nothing, but you just arrive at the issue where we may be off a lot more than just 1 million barrels. So it helps, but it’s unlikely to solve the problem,” he said. “In the end, it’s a little bit of a Band Aid and I think a little bit of hoping to get later in the year OPEC catch up.”
The White House also used Thursday’s announcement to criticize the domestic energy industry for “sitting on” more than 12 million acres of federal land and 9,000 unused but already approved permits for production.
Specifically, Biden implored lawmakers to impose fees on companies that aren’t using wells from their leases on acres of public lands.
“Companies that are producing from their leased acres and existing wells will not face higher fees,” the administration said. “But companies that continue to sit on non-producing acres will have to choose whether to start producing or pay a fee for each idled well and unused acre.”
A senior administration official later added that the White House has been meeting with industry leaders to encourage producers to use already approved land to ramp up U.S. capacity with mixed feedback.
“We believe the industry needs to step up,” the official said. “It needs to do more, there needs to be investing in additional production.”
“There are companies out there that have said they are, that are doing the right thing,” the person added. But there are others “who’ve said that it doesn’t matter where the price point is, they’re not going to produce more. They’re instead focused on returning dividends and distributions to shareholders.”
Energy Secretary Jennifer Granholm said in a tweet Thursday afternoon that her department is immediately ready to deploy the 1 million barrels per day.
The White House said Biden will also urge lawmakers to foster American energy independence by passing legislation to speed up the transition to clean energy.
The president also plans to invoke the Defense Production Act to support the production and processing of minerals and materials used for large capacity batteries like lithium, nickel, cobalt, graphite and manganese.
“The sectors supported by these large capacity batteries—transportation and the power sector—account for more than half of our nation’s carbon emissions,” the administration said in a fact sheet.