Oil prices on Tuesday rose to the highest level in a week after the United States and other countries agreed to release tens of millions of barrels of oil from reserves to try to force prices down.
West Texas Intermediate crude for January delivery, which is the U.S. benchmark, jumped $1.75 or 2.5%, to close at $78.50 a barrel. Global benchmark Brent crude surged $2.61, or 3.3%, to $82.31 a barrel.
The U.S. President Joe Biden on Tuesday announced that the country’s Department of Energy will release 50 million barrels of oil from its reserves as part of an ongoing effort to lower oil prices and address supply gaps around the World.
According to a statement published on the white house webpage, the U.S. president has been working with countries across the world to address the lack of supply as the world exits the pandemic.
“The Department of Energy will 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 exiting the pandemic and supply,” the statement partly reads.
It explained that 32 million barrels will be exchanged over the next several months, releasing oil that will eventually return to the Strategic Petroleum Reserve in the years ahead, and that the exchange is a tool matched to today’s specific economic environment.
It added that 18 million barrels will be an acceleration into the next several months of a sale of oil that Congress had previously authorized.
“The exchange also automatically provides for re-stocking of the Strategic Petroleum Reserve over time to meet future needs,” the statement said.
The moveis being taken in parallel with other major oil-consuming nations, including China, India, Japan, South Korea and the UK.
Read the country’s full statement below:
Announcement is in parallel with other major energy consuming nations, including China, India, Japan, Republic of Korea, and the United Kingdom
Over the last 18 months, the COVID-19 pandemic forced an unprecedented global economic shutdown. As the world is re-opening from a near economic standstill, countries across the globe are grappling with the challenges that arise as consumer demand for goods outpaces supply. But here in the United States, the economic recovery is stronger and faster than anywhere else in the world – 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 – in large part due to President Biden’s American Rescue Plan, which funded and facilitated a nationwide vaccination program, provided resources to schools and small businesses to keep them open in the face of COVID waves and put money in the pockets of those hit hardest by the pandemic. As a result of the strong recovery in the United States, Americans have nearly $100 more per month in disposable income in their pockets this year, even as COVID has continued to complicate the economic recovery around the world.
Even so, American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand as the global economy emerges from the pandemic. That’s why President Biden is using every tool available to him to work to lower prices and address the lack of supply.
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Today, the President is announcing that the Department of Energy will 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 exiting the pandemic and supply.
The President has been working with countries across the world to address the lack of supply as the world exits the pandemic. And, as a result of President Biden’s leadership and our diplomatic efforts, this release will be taken in parallel with other major energy consuming nations including China, India, Japan, Republic of Korea and the United Kingdom. This culminates weeks of consultations with countries around the world, and we are already seeing the effect of this work on oil prices. Over the last several weeks as reports of this work became public, oil prices are down nearly 10 percent.
The U.S. Department of Energy will make available releases of 50 million barrels from the Strategic Petroleum Reserve in two ways:
32 million barrels will be an exchange over the next several months, releasing oil that will eventually return to the Strategic Petroleum Reserve in the years ahead. The exchange is a tool matched to today’s specific economic environment, where markets expect future oil prices to be lower than they are today, and helps provide relief to Americans immediately and bridge to that period of expected lower oil prices. The exchange also automatically provides for re-stocking of the Strategic Petroleum Reserve over time to meet future needs.
18 million barrels will be an acceleration into the next several months of a sale of oil that Congress had previously authorized.
The President stands ready to take additional action, if needed, and is prepared to use his full authorities working in coordination with the rest of the world to maintain adequate supply as we exit the pandemic.
Even as the President is helping to lead the world in addressing oil supply imbalances, he is also focused 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. There is mounting evidence that declines in oil prices are not translating into lower prices at the pump. Last week, the President asked the Federal Trade Commission to examine what is going on in oil and gas markets and to consider “whether illegal conduct is costing families at the pump.”
Today’s announcement reflects the President’s commitment to do everything in his power to bring down costs for the American people and continue our strong economic recovery. At the same time, the 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 combating climate change in American history and is a critical step towards reaching a net-zero emissions economy by 2050 and reducing our dependence on foreign fossil fuels.