The United States and five other world powers on Tuesday announced a coordinated effort to tap into their national oil reserves, in an effort to reduce rising gas prices that have infuriated consumers around the world.
The move appeared to overwhelm oil traders who had expected President Biden to announce a larger release from America’s Strategic Petroleum Reserve, the world’s largest at 620 million barrels. The price of a barrel of crude rose even after the announcement in global trade, although government officials said prices could fall in the coming weeks.
The market response underscored the difficulties Mr. Biden faces, both political and economic, in trying to respond to the fastest rise in US inflation in three decades. The president has seen his approval ratings plummet as gas and food prices have risen, while Republicans have launched a steady series of attacks to blame the Democrats.
Mr Biden has shifted his coverage of the matter in recent weeks, hoping to show consumers that he understands their financial pain. At the White House on Tuesday, he touted the release of oil from the strategic reserve as a major step toward cutting fuel costs for drivers at the start of the holiday travel season.
“Today we are launching a major effort to moderate the price of oil, an effort that will span the globe and eventually reach your corner gas station, God willing,” said Mr. Biden.
“While our combined actions will not solve the high gas price problem overnight, they will make a difference,” he said. “It will take time, but before long you should see the price of gas drop where you fill your tank.”
Earlier on Tuesday, government officials said Mr Biden had ordered the Energy Department to tap 50 million barrels of crude oil in the Strategic Petroleum Reserve. Traders had expected 100 million barrels, said Richard Bronze, chief of geopolitics at Energy Aspects, a market research firm in London.
Britain said it would allow the release of up to 1.5 million barrels and India said it would release five million. Mr. Bronze estimated that Japan and South Korea would each add four million to five million barrels. China did not disclose details of its plans.
The joint effort, the largest ever to release strategic reserves in multiple countries, aims to address fluctuations in supply and demand for oil, government officials said. And it was a shot across the bow of OPEC Plus, the name for the Organization of the Petroleum Exporting Countries and also for Russia and other countries. Mr Biden has urged those countries to increase production but has been rejected.
The move could garner backlash next week, when the group holds its monthly meeting. While it might push those countries to increase production, it might just as well push the cartel to further restrict supply and raise world prices.
At recent monthly meetings, OPEC Plus has stuck to plans to increase production by a relatively modest 400,000 barrels per day each month. US officials dodged a question about possible OPEC Plus retaliation. The officials said they had spent weeks urging oil producers to announce their own supply increases and made it clear to those countries that Mr. Biden and other world leaders were considering their own emergency releases. They said Biden would have preferred a parallel release with more oil-producing countries.
The oil price has fallen since the end of October, partly in anticipation of countries taking action to curb energy costs. The US benchmark, West Texas Intermediate, jumped immediately after the administration’s announcement, trading 1.3 percent higher that day. The price had fallen 4.75% so far this month.
Demand for oil dropped rapidly in the early months of the pandemic, forcing oil-producing countries to cut production. In the United States, reduced demand led to a substantial decline in drilling; the number of active oil rigs in the country fell by nearly 70 percent in the summer of 2020.
As prices soared in recent months, Mr. Biden looked for ways to show he was trying to tame prices, including asking the Federal Trade Commission to investigate possible illegal behavior by major oil companies in the national gasoline market. The president has urged oil producers to ramp up supplies, while urging the US and other countries to forgo fossil fuels in the long term to stave off catastrophic global warming.
On Tuesday, Mr Biden said his environmental agenda is not contributing to the recent price hikes at the pump.
“My effort to fight climate change is not raising the price of gas,” he said.
The emergency supply that Biden tapped is stored in underground caves in Texas and Louisiana. Established after the 1973-74 oil embargo by Arab members of the Organization of the Petroleum Exporting Countries, it has been tapped in emergencies such as the build-up to the Persian Gulf War in 1991 and the aftermath of Hurricane Katrina in 2005, when a much of the oil infrastructure in the Gulf of Mexico was damaged. The reserve is also used to exchange or lend oil to refineries when accidents or storms block shipping channels.
Most experts believe that a release could eventually bring prices down modestly, but only for a short time, as oil prices are set globally and world consumption averages about 100 million barrels per day. The average price for a gallon of regular gasoline in the United States rose Tuesday from $2.11 a year ago to $3.40, according to the travel company AAA. But over the past week, gas prices have begun to level off.
Several recent presidents have ordered releases from America’s strategic reserves, including Mr. bush; his father, George H. W. Bush; Bill Clinton; and Barack Obama.
But research suggests that the effect on gas prices is, for the most part, modest at best — underscoring how gas prices are largely beyond a president’s control.
Obama’s administration led the most recent coordinated global release of oil reserves in June 2011, when the United States and 27 other countries released 60 million barrels of reserves to replace lost production from Libya that was halted by political unrest in the North. -African country. Of the total amount of oil released, about half came from reserves in the United States, the rest from the other 27 industrialized countries that were part of the International Energy Agency.
Understand rising gas prices in the US
Biden administration officials said the coordinated effort announced Tuesday would consist of two parts: a multi-month loan of 32 million barrels to refineries and the accelerated sale of 18 million barrels, already approved by Congress.
Britain will allow companies to voluntarily release their oil reserves. If each company exercises the option, that would rise to 1.5 million barrels, a British government representative said.
Helima Croft, head of global commodities at RBC Capital Markets, an investment bank, said OPEC Plus could choose to respond at its next meeting, December 2.
“If OPEC wants to be adversaries, they can mitigate the impact of the oil release,” she said, not approving the next monthly production increase of 400,000 barrels per day at the meeting.
On the other hand, she added, doing so would “expose them to a lot of trouble in Washington,” possibly including an antitrust bill in Congress targeting OPEC known as NOPEC, which could call for countries to get behind their financial reserves. as Saudi Arabia and the United Arab Emirates. “I think it would be a nuclear option and OPEC will not want to go down that road,” she said.
Robert McNally, president of Rapidan Energy Group, a market research firm and a former energy consultant in the George W. Bush White House, said Tuesday’s announcement “may be politically smart, but I don’t think it’s smart in terms of policy and will likely to backfire.”
“There’s a good chance OPEC Plus will compensate for this, and they have a bigger fire hose than we do,” he said. “It is sheer folly to use strategic stocks to defend an oil price level in a global market.”
Republicans, including Representative Kevin McCarthy of California, the House minority leader, criticized Mr. Biden and blamed the White House for inflation.
In a tweet, Mr. McCarthy said the decision to tap America’s strategic reserves is “a gross political ploy just 3 days before Thanksgiving.”
Democrats in Congress, including Senate majority leader Chuck Schumer, recently called on Mr. Biden to take action to help Americans immediately.
Jennifer M. Granholm, the secretary of energy, warned Tuesday against expecting an immediate, dramatic drop in gas prices. When asked when Americans might see lower prices, Ms. Granholm promised nothing: “It won’t be tomorrow,” she said.
Eshe Nelson and Clifford Krauss reporting contributed.