Biden on a mission to combat rising energy prices and lack of supply by tapping into oil reserves
The demand for oil and gas has been skyrocketing across the world and the Biden administration first called on oil-rich nations to ramp up production to pre-pandemic levels, however, as this was ignored, President Biden ordered the release of oil from the nation’s Strategic Petroleum Reserve in an effort to address rising gas prices.
The White House reported on Wednesday that the release from the Strategic Petroleum Reserve was a part of ongoing efforts to lower prices and address the lack of supply around the world. This comes on the heels of OPEC countries’ decision not to heed the call to increase oil production.
The COVID-19 pandemic forced an unprecedented global economic shutdown over the past 18 months. Countries across the globe are grappling with the challenges that arise as consumer demand for goods outpaces supply, while the world is re-opening from a near economic standstill.
According to the Organization for Economic Co-operation and Development, the US is the only one of the major economies to have returned to pre-pandemic gross domestic product levels. This is in large part due to President Biden’s American Rescue Plan.
However, the White House’s statement outlines that American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills. In addition, American businesses are also impacted by high energy prices, because the oil supply has not kept up with demand as the global economy emerges from the pandemic.
Keeping all of this in mind, President Biden has decided to order the Department of Energy to make available releases of 50 million barrels of oil from the Strategic Petroleum Reserve to lower prices for Americans and address the mismatch between demand and supply.
The announcement about releasing oil from reserves is in parallel with other major energy-consuming nations, including China, India, Japan, the Republic of Korea, and the United Kingdom. After weeks of consultations with countries around the world, the White House claims the effect of this work is already visible on oil prices, as they are down by nearly 10 per cent.
Moreover, releases of 50 million barrels will be made available in two ways by the U.S. Department of Energy. The first one outlines that the 32 million barrels will be exchanged over the next several months. Basically, it means releasing oil that will eventually return to the Strategic Petroleum Reserve in the years ahead.
The White House explains that this exchange is a tool matched to today’s specific economic environment, where markets expect future oil prices to be lower than they are today. It also automatically provides for re-stocking of the Strategic Petroleum Reserve over time to meet future needs.
The second way refers to 18 million barrels, which will be made available as an acceleration into the next several months of a sale of oil that Congress had previously authorized.
While helping to lead the world in addressing oil supply imbalances, President Biden is also focusing on how consolidation in the oil and gas sector may be resulting in anti-competitive practices that keep American consumers from benefitting when oil prices fall.
As the decline in oil prices is not translating into lower prices at the pump, the President asked the Federal Trade Commission to examine what was going on in oil and gas markets and to consider “whether illegal conduct is costing families at the pump.”
The Biden administration remains committed to the President’s ambitious clean energy goals, as reflected in the historic Bipartisan Infrastructure Law signed last week and the House-passed Build Back Better Act that together represent the largest investment in combatting climate change in American history, says the White House.
This is a critical step towards reaching a net-zero emissions economy by 2050 and reducing dependence on foreign fossil fuels. To that end, a U.S. government agency proposed measures ahead of COP26 to cut methane emissions resulting from oil and gas operations. Furthermore, the United States and China joined forces during the last day of COP26 to curb climate change and accelerate the global transition.
The two nations revealed they would be working together in the critical decade of the 2020s and pursue efforts to hold the global average temperature increase to well below 2 degrees C and to pursue efforts to limit it to 1.5 degrees C.
In a bid to speed up the energy transition and meet climate change goals, President Biden paused new oil and natural gas leasing on public lands and offshore waters in January until an analysis of their impacts on the environment and value to taxpayers can be completed.
However, a federal judge ordered a resumption of auctions in June. The decision was justified by citing the Outer Continental Shelf Lands Act, which outlines that the government is required by law to offer acreage to the oil and gas industry. Due to this, BOEM held the first oil and gas lease sale for acreage in federal waters in the Gulf of Mexico under the Biden administration last week. This resulted in more than $191 million in high bids.
Another potential oil and gas lease sale was announced on 24 August 2021 by the Department of the Interior. On 29 October 2021, BOEM opened a 45-day public comment period to seek input on a revised draft Environmental Impact Statement (EIS), analysing the possible environmental impacts of a potential oil and gas lease sale in the Cook Inlet area, off Alaska.
This is scheduled to end on 13 December 2021 and the received comments will be properly analysed and used for the preparation of the final EIS.