(WASHINGTON) — Attempting to combat what’s he’s labeled “Putin’s price hike,” President Joe Biden announced a plan on Thursday to release roughly 1 million barrels of oil per day from the nation’s strategic petroleum reserve over the next six months to reduce energy and gas prices.
Biden told Americans “there is no firm answer” as to when gas prices will go down, but predicted they will go down “fairly significantly.”
“Today I want to talk about one aspect of Putin’s war that affects and has real effects on the American people: Putin’s price hike that Americans and our allies are feeling at the pump. I know how much it hurts,” Biden began. “As you’ve heard me say I grew up in a family, like many of you, where the price of gasoline was discussed at the kitchen table. None of it should hinge on whether a dictator declares war.”
Biden blamed “two roots” for the high energy costs: Russian President Vladimir Putin’s ongoing invasion of Ukraine and the lingering economic effects of COVID-19.
“When COVID struck, demand for oil plummeted, so production slowed down worldwide. Because of the strength and the speed of our recovery, demand for oil shot back up much faster than the supply. That’s why the cost of gas began to rise last year. The second root is Vladimir Putin,” he said.
Biden predicted Americans could pay “anything from 10 cents to 35 cents a gallon” less at the pump, setting up the national average would fall below $4 a gallon. Patrick De Haan, head of petroleum analysis for Gas Buddy, pointed ABC News to a tweet in which he raised some skepticism.
“I do believe the national average could eventually fall under $4/gal in the weeks ahead, but I don’t necessarily think this SPR release is the event that will be the primary catalyst for it,” he said in a tweet Thursday. “If anything it could help get us there quicker, but again, likely at the expense of long term stability.”
Biden announced the major step during a scheduled event to discuss actions his administration is taking to rein in soaring energy prices that have spiked even further following Russia’s invasion of Ukraine.
“The action I’m calling for will make a real difference over time, but the truth is, it takes months, not days, for companies to increase production. That’s why the next part of my plan is so important,” he said. “Today I’m authorizing the release of 1 million barrels per day over the next six months.”
He said the release was coordinated with allies and partners around the world.
Speaking directly to oil company executives, Biden told them “enough of lavishing excessive profits” and passing on the cost of oil to consumers, adding that they have “everything they need” and “nothing is standing in their way” to boost production.
“They don’t want to increase supply because Putin’s price hike means higher profits,” Biden said.
He went on to propose a “use it or lose it” policy, calling on Congress to create legislation to tax companies if they’re sitting on idle wells and lands that aren’t producing for Americans.
“No company should take advantage of a pandemic or Vladimir Putin at the expense of American families,” Biden said. “Production and innovation, that’s what they should do.”
“Invest in your customers,” he added, noting that it’s not only “the patriotic thing” but “it’s good for your business as well.”
Senior administration officials also acknowledged relief at the pump may be delayed.
“We’re not focused right now on sort of the immediate short-term price movements,” an official said on a call with reporters earlier Thursday, adding that the focus is on addressing the gap in supply as Russian oil comes off the market.
The first barrels from the announcement are set to come to the market in May for delivery that month. Officials said all the funds from the sale of the oil will go to restocking the reserves.
“We expect that to occur once the oil price has come down, we are no longer in an emergency,” an official told reporters.
About 3 million barrels a day of Russian oil will come off the market in April due to Western sanctions, according to the International Energy Agency, and this plan could help alleviate pain at the pump by helping to replace that loss.
This would be the third time Biden has had to tap into the strategic petroleum reserve. In November, he authorized the release of 50 million barrels as gas prices surged ahead of the holidays, and along with 30 other countries, the U.S. released 30 million barrels following the start of the war in Ukraine, though that did little to ease skyrocketing prices.
As of Friday, there were more than 568 million barrels of oil in the reserve, according to the Department of Energy.
Given the complexity and volatility of the oil market, many geopolitical and economic factors feed into oil prices and there is no guarantee this release will keep prices down for an extended period of time.
Overnight, crude oil prices were down roughly 5% in reaction to Biden’s expected announcement, which means the price at the gas pump could also dip in the coming days.
The current national average for a gallon of gas is $4.23, according to AAA, $1.35 higher than this time last year.
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