President Biden’s move to release about 180 million barrels of oil from US strategic reserves is expected to cause gasoline prices to fall slightly.
Patrick De Haan, head of petroleum analysis at gas pricing website GasBuddy, said prices could fall by 10 to 20 cents a gallon on Biden’s announcement that oil will be released from the Strategic Petroleum Reserve (SPR).
But he warned that exactly where prices will end up in the coming weeks is unclear as the release doesn’t come in a vacuum and other factors could drive prices up or down.
“The problem I have is that today’s oil decline could be offset by current events over the next two weeks that change the situation,” De Haan said.
Robert Weiner, a professor at George Washington University’s business school, predicted prices could fall by about 25 cents.
“Based on past experience, we have some evidence of the impact of SPR releases on oil prices,” Weiner said, citing supply disruptions a decade ago that resulted from the Libyan civil war and a subsequent SPR release by the Obama administration.
Biden announced Thursday that the U.S. would release about 1 million barrels of oil a day for six months, a move the administration described as the largest oil reserve ever released.
“This is a wartime bridge to increase oil supplies until production ramps up later this year. And it’s by far the largest release from our national reserve in our history,” he said. “It will provide a historic amount of supply for a historic amount of time – a six-month bridge to sinking.”
Biden expressed confidence that prices would fall in response – although he said he wasn’t sure by how much.
“It’s going to go down, and it could go down pretty significantly,” he said, postulating that the drop could be anywhere from 10 cents to 35 cents a gallon.
Gas prices have skyrocketed in the past few weeks since Russia invaded Ukraine. as The US and other countries imposed tough sanctions on Moscow and some traders refused Russian casks. Russia is a major global oil producer. Gas prices are now about 70 cents higher than before the Russian invasion of Ukraine.
Biden’s decision to open the strategic reserve is meant to bring relief to consumers — and Offer political aid for Democrats. Republicans have attacked the White House and Democrats over the higher price at the pump.
It adds to the uneasiness surrounding the Democrats as they march toward the midterm elections.
Claudio Galimberti, senior vice president of analysis at Rystad Energy, said the release was more effective than previous releases because of its size – including a 30 million barrel release announced in early March.
“The only one that was credible is the current one, and the market is reacting,” Galimberti said. “Credibility comes from the size of the SPR publication.”
Weiner also said the gradual nature of the release, where the barrels are released slowly rather than all at once, will also help bring prices down.
“It sends a reassuring signal that the United States is not just taking a one-off action,” he said. “I think you get more bang for your buck by announcing upfront that you’ll be doing this in the future, rather than just saying you’re only going to do it once.”
He said the 1 million barrels a day could replace about a third of the barrels that could be lost in a day as a result of the Russian invasion and sanctions and penalties against Moscow. Early estimates are that 3 million barrels a day could be taken off the market because of the war, according to the Federal Reserve Bank of Dallas.
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If there is a pullback after the strategic reserve is released, it could be a political victory for Biden and the Democrats, giving them an opportunity to indicate that high prices are being at least somewhat mitigated for consumers.
But Republicans, even before Biden’s announcement, criticized the move as damaging to US energy security and projected their line of attack.
“The Biden administration must not compromise our future energy security in a short-term attempt to salvage the president’s plummeting poll numbers,” Sen. Bill Cassidy (R-La.) said in a statement Thursday in anticipation of Biden’s move.
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