President Joe Biden has ordered officials to prepare for more releases from the US Strategic Petroleum Reserve as he approved the sale of 15mn barrels of oil in December and established a plan to replenish the dwindling emergency stockpile.
At the White House on Wednesday, Biden said the moves would “continue to stabilise markets and decrease the prices at a time when the actions of other countries have caused such volatility”.
He insisted it was “not politically motivated at all”, brushing aside criticism that the oil releases were only done to boost Democratic chances in the November midterm elections. But he acknowledged that the White House’s efforts to bring down energy costs had still fallen short — and prices had not “fallen enough”.
Biden also laid some blame on oil companies for the high prices of petrol and called on them not to distribute profits to investors while consumers were struggling with such high prices.
High petrol prices have been a political liability for Democrats ahead of the midterms.
After a sharp fall during the summer, prices at the pump have been edging up again in recent weeks. At just under $4 per gallon, prices are almost 60 per cent higher than when Biden took office in January 2021.
The sale of a further 15mn barrels by the end of the year would complete the release of the 180mn barrels Biden committed to injecting into the market in March, but the White House has retained the option of future intervention if petrol prices rise.
A senior administration official said on Tuesday that the president had directed his top economic and energy officials to be in a “high state of readiness” and prepare for the potential sale of additional barrels of oil beyond the 180mn if necessary, a signal to markets and oil-producing nations that the US will try to enforce a ceiling on the price of crude oil.
“We remain very able, very vigilant: if we need to deal with additional challenges with supply, with affordability, we’ll have additional opportunity with the SPR if we need to do more sales into the future beyond that December time period,” a different senior administration official said.
The move comes after a decision by Opec+ countries to cut oil production, which triggered an angry response in Washington by threatening to raise prices at a time of rampant inflation.
The “continuation” of the US releases — part of the larger months-long stock drawdown of 180mn — was designed as a “bridge” until oil output from the US and other countries picked up, officials said.
But analysts have cautioned that US supply growth remained sluggish, with Wall Street calling for shale groups to use a windfall from higher oil prices to pay juicy dividends rather than launch costly drilling campaigns.
Oil analysts said the supply release was designed to send a signal of action on petrol prices but would have a limited impact on global oil market balances.
“After the Opec meeting and with the midterms in mind, the administration needed to be seen doing something — and that seems to be announcing more SPR barrels that were already planned,” said Amrita Sen, head of research at consultancy Energy Aspects.
US oil output remains about 1mn barrels per day below the peak hit in 2019.
The SPR has emerged as the primary tool Biden has used this year to try to tame petrol prices as they soared in response to high demand and supply disruptions, including the impact of Russia’s war in Ukraine. In August, Biden hailed the “fastest decline [in petrol prices] in over a decade” following months of SPR releases and a sell-off in international crude oil markets.
But the administration’s reliance on the SPR has come under fire from Republicans who argue it has fallen to dangerously low levels. According to the latest Energy Information Administration figures, the reserve held 409mn barrels of crude in the first week of October, its lowest level since 1984.
The White House also announced a mechanism to replenish the reserve to stop it from being depleted and reassure domestic oil producers that the administration envisioned a floor to the oil price.
It said that the SPR would purchase oil if it fell to between $67 and $72 per barrel in spot transactions, but would also enter into contracts to purchase it based on its forward price in the futures market. US oil prices sat at about $83 a barrel before the announcement on Tuesday.
“It sends a signal that the US is a buyer at that price, which injects demand into the market at that price and reduces the risk that a number of producers and others have phrased — that they’re concerned that if oil prices fall too fast, they’ll just fall precipitously,” the first senior administration official said. “That should give even more confidence for people to invest.”
White House officials also signalled that Biden would call more forcefully on US oil companies to bring down retail petrol prices: one said oil companies typically earned 90 cents for a gallon of petrol but today it was between $1.30 and $1.40.
“It is incumbent on energy companies to not continue to just take record profit for each gallon of gasoline when they could help to . . . bring down [prices],” the official added.
The White House on Tuesday did not rule out curbs on fuel export, saying “all options” remained on the table if they help “ensure domestic supply”.