President Biden is ordering the release from the Strategic Petroleum Reserve of 1 million barrels per day on average for the next six months, he announced Thursday.
Why it matters: The historic release size underscores how much Russia's war is causing havoc in energy markets — and how the White House hopes to limit political fallout from high gas prices.
Driving the news: The release is expected to "shore up global supplies," per White House senior administration officials, who also say that it will lower gas prices.
- "This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up," the White House said.
- Biden also authorized the use of the Defense Production Act to support the production and processing of minerals and materials used for large capacity batteries, including lithium, nickel, cobalt and graphite.
- Biden on Thursday also urged Congress to charge oil and gas companies if they are sitting on wells that are not producing oil and leases that they are not developing, per the White House.
What they're saying: "It is hard to overstate the scale of this intervention if it bears out. It would be the largest drawdown volume announced in the 45-year history of the SPR by a factor of 3.6x," the research firm ClearView Energy Partners said in a note.
Between the lines: Oil prices fell sharply Wednesday night after Bloomberg, Reuters and elsewhere reported on Biden's expected announcement, with the U.S. benchmark WTI down more than 4% to $104.46 and Brent seeing a similar drop.
What we're watching: The effect of the plan on the tight oil market, and potential new releases from other nations coordinated through the International Energy Agency.
- The impacts are hard to tease out as international efforts to isolate Russia could lead to sharp declines in its exports that exceed the reported daily size of the SPR release.
- Goldman Sachs, in a note, said the reported plan would ease, but not resolve, oil's "structural deficit" and help the market rebalance.
- "This would reduce the amount of necessary price-induced demand destruction, the sole oil rebalancing mechanism currently available in a world devoid of inventory buffers and supply elasticity," Goldman Sachs noted.
- "This would remain, however, a release of oil inventories, not a persistent source of supply for coming years."
Yes, but: While the release of oil barrels from the emergency reserve could help stabilize oil prices in 2022, JPMorgan said that a larger than expected loss in Russian oil supplies could leave 2023 in a "deep deficit," Markets Insider reports.
Catch up fast: It's the latest of several Biden administration attempts to try and tame prices via the SPR.
- In November, the White House announced 50 million barrels in releases, with another 30 million in early March, alongside 30 million from other nations.
The Energy Department, which manages the reserve, says it holds more than 568 million barrels of oil.
Editor's note: This article has been updated with new details throughout.
