The White House on Tuesday signaled “additional significant” drawdowns from the U.S. Strategic Petroleum Reserve (SPR) beyond the 180 million barrels announced in March. But an expert says these drawdowns “failed to control oil prices.”
“This sale will complete the historic, 180-million-barrel drawdown the President [Joe Biden] announced in the spring, which has helped to stabilize crude oil markets and reduce prices at the pump,” a White House fact sheet states.
Biden has also called on the Department of Energy (DOE) to be ready for “additional significant SPR sales this winter if needed due to Russian or other actions disrupting global markets.”
The SPR is at its lowest level since 1984, with around 400 million barrels remaining. At its peak, in 2010, there were over 726 million barrels.
On Wednesday, Biden will also announce that the U.S. government intends to repurchase crude oil to replace the depleted SPR inventory when prices are at or below $67 to $72 per barrel.
The White House said the DOE is finalizing a new rule to allow fixed-price contracts through a competitive bid process for oil delivered at a future date, which the Biden administration hopes will create certainty for the oil markets.
Biden ‘Failed to Control Oil Prices’
The Biden administration is coming to grips with “the reality” that its SPR drawdowns “failed to control oil prices,” according to Phil Flynn, a senior account executive at The Price Futures Group and author of “The Energy Report.”“It’s kind of like the little shop of horrors. When you start giving the market a little bit of blood it’s going to want more and more and more, and it will never be truly satisfied,” he added. “This is especially true because the Strategic Petroleum Reserve was never meant as a vehicle to control prices and if it was, then the size of the SPR was totally inadequate for the job.”
Flynn, who expressed skepticism that tapping the SPR was to lower gas prices, said the Biden administration “isn’t getting the message” that its strategy isn’t working.
He noted that the price of gas is 54.5 cents higher than a year ago before the SPR releases began. The White House, however, said gas prices are 40 cents per gallon lower “from their peak earlier this year.”
The White House also accused retailers of hiking gas prices for profit and Biden is expected to call on them to pass on savings to consumers.
“The profit that energy refining companies are now capturing on every gallon of gasoline is about double what it typically is at this time of year, and the retailer margin over the refinery price is more than 40 percent above the typical level,” the White House fact sheet states.
“These outsized industry profit margins—adding more than $0.60 to the average price of a gallon of gas—have kept pump prices higher than they should be. Keeping prices high even as input costs fall is unacceptable, and the President will call on companies to pass their savings through to consumers—now.”
