Joe Biden to release 15 million barrels from US oil reserve in response to Opec+ cut

President Joe Biden will announce the release of 15 million barrels of oil from the US strategic reserve Wednesday as part of a response to recent production cuts announced by Opec+ members, and he will say more oil sales are possible this winter, as his administration rushes to be seen as pulling out all the stops ahead of next month’s midterm elections.

Biden will deliver remarks Wednesday to announce the drawdown from the strategic reserve, senior administration officials said on Tuesday on the condition of anonymity to outline Biden’s plans.

It completes the release of 180 million barrels over six months authorised by Biden in March. That has sent the strategic reserve to its lowest level since 1984 in what the president called a “bridge” until domestic production could be increased. The reserve now contains roughly 400 million barrels of oil.

Biden will also open the door to additional releases this winter in an effort to bring prices down, but administration officials would not detail how much the president would be willing to tap and the conditions under which he would do so.

Biden will also say that the US government will restock the strategic reserve when oil prices are at or lower than US$67 to US$72 a barrel, an offer that administration officials argue will increase domestic production by guaranteeing a baseline level of demand even if prices fall.

Yet the president is also expected to renew his criticism of the profits reaped by oil companies – repeating a bet made this summer that public condemnation would matter more to these companies than shareholders’ focus on returns.

It marks the continuation of an about-face by Biden, who has tried to move the US past fossil fuels to identify additional sources of energy to satisfy US and global supply as a result of disruptions from Russia’s invasion of Ukraine and production cuts announced by the Saudi Arabia-led oil cartel.

The prospective loss of 2 million barrels a day – 2 per cent of global supply – has had the White House saying Saudi Arabia sided with Russian President Vladimir Putin and pledging there will be consequences for supply cuts that could prop up energy prices. The 15 million-barrel release would not cover even one full day’s use of oil in the US, according to the Energy Information Administration.

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The administration could make a decision on future releases a month from now, as it requires a month and a half for the strategic reserve to notify would-be buyers.

Biden had pledged to speak about his plans to reduce petrol prices this week. White House press secretary Karine Jean-Pierre declined to say what policies Biden will discuss, telling reporters at Tuesday’s briefing: “I will let the president speak for himself.”

Jared Bernstein, a member of the White House Council of Economic Advisers, said a past release of oil from the US strategic reserve contributed to a decline in prices at the pump this summer. That decline ended last month as prices began to rise again, though they have eased somewhat in the past week.

Bernstein suggested to Fox News Sunday that the reserve is large enough that the White House could tap it again.

“There are still 400 million barrels of oil in the strategic reserve – it is more than half full,” Bernstein said, adding that Biden had not yet made a final decision on releasing more barrels.

Biden still faces political headwinds because of gas prices. AAA reports that gas is averaging US$3.87 a gallon, up from a month ago when falling prices at the pump suggested that the president and his fellow Democrats were faring better in surveys.

An analysis Monday by ClearView Energy Partners, an independent energy research firm based in Washington, suggested that two states that could decide control of the evenly split Senate – Nevada and Pennsylvania – are sensitive to energy prices. The analysis noted that gas prices over the past month rose above the national average in 18 states, which are home to 29 potentially “at risk” House seats.

Even if voters want cheaper petrol, expected gains in supply are not materialising because of a weaker global economy. The US government last week revised downward its forecasts, saying that domestic firms would produce 270,000 fewer barrels a day in 2023 than was forecast in September. Global production would be 600,000 barrels a day lower than forecast in September.

The hard math for Biden is that oil production has yet to return to its pre-pandemic level of roughly 13 million barrels a day. It is about a million barrels a day shy of that level.

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The oil industry would like the administration to open up more federal lands for drilling, approve pipeline construction and reverse its recent changes to raise corporate taxes.

The administration counters that the oil industry is sitting on thousands of unused federal leases and says new permits would take years to produce oil with no impact on current gas prices. Environmental groups, meanwhile, have asked Biden to keep a campaign promise to block new drilling on federal lands.

Biden has resisted the policies favoured by US oil producers. Instead, he has sought to reduce prices by releasing oil from the US reserve, shaming oil companies for their profits and calling on greater production from countries in Opec+ that have different geopolitical interests, said Frank Macchiarola, senior vice-president of policy, economics and regulatory affairs at the American Petroleum Institute.

“If they continue to offer the same old so-called solutions, they’ll continue to get the same old results,” Macchiarola said.

Because fossil fuels lead to carbon emissions, Biden has sought to move away from them entirely with a commitment to zero emissions by 2050. When discussing that commitment nearly a year ago after the G20 leading rich and developing nations met in Rome, the president said he still wanted to also lower gas prices because at “US$3.35 a gallon, it has profound impact on working-class families just to get back and forth to work”.

Since Biden spoke of the pain of gas at US$3.35 a gallon and his hopes to reduce costs, the price has risen another 15.5 per cent.