The president of the United States, Joe Biden, announced this Thursday that he will launch 180 million barrels of oil – one million a day for six months – from the country’s strategic reserves to try to lower the price. This amount of crude oil is the approximate equivalent of two days of global demand. The decision has caused a sharp drop in the price of oil, which closed on Wall Street with a drop of 7%, slightly above 100 dollars a barrel, on a day marked by red numbers.
In an appearance at the White House, the president appealed to accelerate the achievement of energy independence to avoid supply crises such as the one caused by the conflict; he urged the industry to produce more “and not settle for record profits” and asked Congress to approve his energy transition plans towards a green economy. The rise in the price of gasoline is rooted in the post-pandemic recovery, by increasing demand, but has been aggravated by the conflict in Ukraine, the president recalled. “I know how much this hurts the pocketbook of Americans when they go to the gas station,” he declared, so he promised to alleviate the upward pressure on prices with an appeal, almost bordering on an order, to encourage production. To the companies that have obtained exploitation licenses but are not operating, he warned, “they will have to start producing or pay for their inactivity.”
“90% of the production from onshore fields is carried out on land that is not owned by the federal government. Of the remaining 10%, federal land, the oil and gas industry has leased millions of hectares. They currently have 9,000 approved drilling permits. They could be mining right now,” Biden lamented on March 8, when he banned the import of Russian oil as a sanction for the Ukraine invasion.
“The magnitude of the measure [la liberación de 180 millones de barriles] it is unprecedented: never before in the world have reserves been released at such a rate for so long. This record output will serve as a bridge until the end of the year, when the increase in national production is consolidated,” the White House recalled today in a statement.
It is not Biden’s first decision that affects the oil reserve fund – last November he announced the release of 50 million barrels to the market to relieve pressure on households and businesses – but it is the first directly linked to the war in Ukraine . The argument most used by the US president since the war began is that his Russian counterpart, Vladimir Putin, should be blamed for the rise in prices, especially the rise in the energy bill. The same argument has been put forward in this Thursday’s announcement. “Americans are facing rising prices at gas stations due to Putin’s price hike. Since he accelerated his military buildup in Ukraine [el despliegue de tropas en la frontera que precedió a la invasión]gasoline prices have risen nearly a dollar a gallon [3,78 litros]. Due to the war declared by Putin, less oil reaches the market and the reduction in supply is increasing the price at the pumps. President Biden is committed to doing everything in his power to help families who, as a result of the conflict, have to pay more. That is why today, the President will announce a two-part plan to ease the pressure on households by immediately increasing oil supplies and achieving lasting energy independence that reduces oil demand and strengthens our clean energy economy.” explains the presidential statement.
With inflation at record highs since the 1980s, the White House highlights how, since the beginning of the year, the average price of a gallon of gasoline has increased by almost a dollar: from $3.30 to $4.20. The ban on importing Russian oil, “a measure demanded and supported by Republicans and Democrats in Congress”, was going to have a cost, Biden warned, which would translate into greater inflationary pressure, despite the fact that Russian crude represented only around to 8% of the country’s supply. To compensate, Washington hopes that domestic oil and gas production will accelerate. The release of 180 million barrels can mean a reduction of between 10 and 35 cents of a dollar per gallon, Biden recalled.
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This worries environmental groups, and represents a certain contradiction to the commitment to the energy transition that Biden has championed. The United States is approaching record levels of oil and natural gas production. “It is expected to increase by one million barrels per day this year and almost 700,000 barrels per day next year,” the White House recalled today.
The Strategic Reserve Fund, created in 1975 after a boycott by Arab producing countries triggered the first global energy crisis, stores 586 million barrels in four closely guarded locations off the coast of Louisiana and Texas. The presidents of the country can use the fund to calm the markets in case of war or when natural catastrophes hit energy infrastructure, for example in the Gulf of Mexico.
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