President Joe Biden made a big announcement this week about oil.
“I’m announcing that the largest ever release from the U.S. Strategic Petroleum Reserve to help provide the supply we need as we recover from this pandemic,” Biden said on Tuesday.
The U.S. will release 50 million barrels of oil that could reach the market by mid to late December.
According to the White House, the administration hopes the move will help lower gas prices, which are the highest they’ve been since 2014, about $3.43 across the country.
In 2019, the U.S. used about 20.5 million barrels of oil a day, so 50 million barrels is just under a two-and-a-half-day supply.
But the president thinks it will make a difference.
“Our combined actions will not solve the problem of high gas prices overnight, it will make a difference. It will take time, but before long you should see the price of gas drop where you fill up your tank,” said Biden.
“America has an enormous amount of strategic oil reserves which are supposed to be used when there are supply disruptions, like if there’s a massive hurricane that disrupts the oil facilities. In this case, however, we don’t have the supply disruptions like due to weather, we just have rising oil prices,” said Jack Strauss, an economics professor at the University of Denver who specializes in forecasting and applied economics.
He explains why the president is so worried about the price of oil.
“The major driver of inflation, always, is oil prices. Because when they increase, they don’t increase by two, three, four or five percent, they increase by 30, 50, 60%,” said Strauss.
Not everyone shares in the optimism that releasing oil will lead to lower gas prices.
“We feel that, that is just upsetting the cart. You see just as a result of that happening, OPEC is already looking to see how to counter that and we saw today the price of oil is up about 2%,” said Brady Pelton, general counsel for the North Dakota Petroleum Council which represents oil producers and contractors in that state.
North Dakota produces the second-highest number of barrels of oil per day in the US. Brady says oil production is up about 1% from projections.
“I’d say that gradual increase in North Dakota production will occur in early 2022. Again that’s so speculative, it’s almost not worth mentioning,” said Pelton.
Other organizations expect oil production to increase as well.
A monthly report from the International Energy Agency shows an expected boost of 1.5 million barrels a day over the next couple of months, which is a sign that prices could soon start to drop.
"Oil production, particularly fracking does respond to increases in oil prices," said Strauss.
Higher prices usually mean more production.
The next move comes from OPEC, the Organization of the Petroleum Exporting Countries.
OPEC could reassess oil output following Biden's announcement.
