For the estimated 55 million Americans that will hit the road this Thanksgiving, this story might sting.
The Biden administration on Tuesday announced 50 million gallons of crude will flow from the government’s Strategic Petroleum Reserve in a move the president says will get sky-high gas prices down as Americans travel far and wide to eat with family and friends. But the conversation around the table may still be the high cost of getting there, because the oil dump could be too little, too late.
That 70s Flow
The Strategic Petroleum Reserve was established in 1975 after supplies were interrupted during the oil embargo of 1973-1974. Today, the US has the largest-known emergency supply in the world, with underground tanks in Louisiana and Texas holding 714 million barrels.
Yesterday’s announcement, which represents just 2.5 days of US oil consumption, is the largest release of crude from the reserve since Libya’s civil war in 2011.
The emergency measure, taken in concert with smaller releases from several other nations, may not do the trick of reducing gas prices (and public frustration):
- In this case, simple models of supply and demand did not pan out as expected. The price of international crude was pushed up 3.3% to $82.31.
- Why? Experts say the actual effect on pump prices could easily be blunted by Russia and Saudi Arabia, which have both played hardball in the past when it comes to oil supply — analysts at the Financial Times suggest the countries may hold back more oil in response to the US stance.
“A coordinated raid of emergency stockpiles absent a geopolitical disruption — and intended to influence global oil prices — is a fateful energy policy precedent that is likely to backfire,” said Robert McNally, vice president of DC-based Rapidan Energy Group.
Gusher: For everyday Americans, the pain at the pump cannot be overstated — the national average price for a gallon of gas was $3.40 earlier this week, up from $2.11 a year ago, according to AAA. And unlike prior periods of higher prices, when energy giants would pump up production to capitalize on high prices, oil production is still down 12% compared to pre-pandemic levels.
Last week President Biden called on the FTC to investigate whether oil majors like ExxonMobil and Chevron are engaged in “potentially illegal conduct,” such as collusion. Worth looking at.