Yesterday, the White House announced that President Biden is ordering the release of one million barrels of oil per day from the Strategic Petroleum Reserve (SPR) for the next six months. Reports suggest some of America’s allies could join the U.S. in releasing barrels from their own reserves. As demand has nearly returned to pre-pandemic levels over the past few months, output has been slow to meet it, and energy costs have surged to historic levels. Russia’s invasion of Ukraine has further driven up gas prices, and Biden’s ban on importing Russian oil earlier this month pushed them even higher.
The administration has tested several avenues to lower prices at the pump. From asking the Federal Trade Commission to investigate energy companies for anti-consumer behavior to pushing a new nuclear deal with Iran – one of the world’s leading oil producers – that would ease sanctions, these efforts have proven largely ineffective at lowering the cost of gas domestically. Republicans point toward actions taken by the administration — such as canceling the Keystone pipeline, suspending new federal oil and gas leases, and raising drilling fees on federal land — as a clear signal to U.S. oil companies to stop producing. Americans have grown increasingly tired of high energy costs at home, causing the President’s approval rating to slip as Republicans continue to pin the blame for soaring prices on Biden for what they view as policies that undermine American energy independence. Biden hopes to counteract the rising energy costs to avoid major backlash in the November midterms.
While the President has ordered two earlier releases from the Reserve with little impact on oil prices, Thursday’s announcement reveals the largest release in the SPR’s nearly 50-year history. Outside of the last six months, American Presidents have ordered emergency releases from the Reserve on three other occasions. According to the Department of Energy, there are currently over 568 million barrels of oil in the SPR. The administration hopes the sizable amount will bridge the gap between high demand and lagging production. Biden’s move quickly impacted crude oil prices, which dropped roughly 4% amid the reports, though it is unclear whether energy costs will drop further or return to earlier heights. Still, the cost of crude oil per barrel remains roughly $40 more than a year ago. On average, Americans use about 21 million barrels of oil per day, with U.S. production currently sitting at about 11.7 million barrels daily.
The President is also asking Congress to penalize energy companies that currently lease public lands but are not producing. The administration hopes this will boost domestic oil and gas production. Biden also intends to invoke the Defense Production Act (DPA) to increase mining for minerals essential to electric vehicle batteries. The DPA allows the President to expedite and expand the production of goods critical to the U.S.’ national security. This move is part of a broader effort to decrease American reliance on fossil fuels in favor of cleaner energy.
Republicans were quick to slam the decision, with Senator Steve Daines (R-MT) calling it a “Band-Aid on a bullet wound.” They argue that taking these steps without direct efforts to increase domestic energy production will have a temporary impact on gas prices if any at all. Democrats counter that the move is necessary amid oil companies’ hesitancy to ramp up production and point to high costs as yet another reason to shift towards green energy. Outside of Washington, the politics of oil becomes even more complex as industry proponents and environmental groups clash on potential solutions. Advocates call for less government regulation on oil production. Meanwhile, environmentalists push for special windfall taxes on energy companies, arguing they have seen record profits by exploiting surging demand as the U.S. emerges from the pandemic. Economic analysts warn that while the release could stabilize gas prices for 2022, it does not help fix the existing deficit in production, which could remain for years.
With Biden’s announcement of releasing barrels from the SPR, we recommend our Oil Crisis Simulation activity for your students. This activity is an excellent way to explain Interest Groups from Unit 5.6 in AP Government. Have your students role-play as different interest groups asking the President to decide on oil pipelines.