(Bloomberg) -- President Joe Biden said his plan to release a million barrels of oil a day from U.S. reserves for six months would lay a foundation for the country to achieve independence from foreign energy suppliers.
Biden touted a separate administration plan to provide more than $3 billion to states to help homeowners weatherize their homes. He’ll also invoke Cold War powers to encourage domestic production of critical minerals for batteries for electric vehicles and other uses. Battery materials will join the list of items covered by the 1950 Defense Production Act.
“It’s time to deliver true long-term energy independence to America once and for all,” Biden said. “It’s not a time for politics.”
The U.S. has been mostly a net exporter of petroleum products, which includes crude oil, refined petroleum, and other products, since late 2019 amid the fracking boom that made the country one of the top producers of oil and natural gas. The U.S. still imports millions of barrels of oil better suited to certain refineries and other refined products a day.
Biden said that he expects allies will agree to release 30 million to 50 million more barrels of oil from their own reserves.
As much 180 million barrels may be released from the stockpile over the next several months, an amount the White House and oil market analysts called unprecedented. The move underscores Biden administration concern about rising gasoline prices and supply shortages following Russia’s invasion of Ukraine.
High pump prices are weighing heavily on the White House’s political prospects in November, when voters will decide whether Biden’s party will retain control of Congress. The president has struggled to tame both gasoline prices and broader inflation, which is at 40-year highs as the global economy adjusts from pandemic disruptions.
Brent crude, the international benchmark, was down 4.9% at $107.86 as of 6:58 p.m. in London.
Despite the administration’s assurances last year that gasoline prices would fall in 2022, they have instead risen dramatically. The White House has blamed the increase on Russia’s invasion of Ukraine, noting in its statement that gasoline prices have spiked nearly $1 a gallon since the start of the year.
U.K Weighs Release
The administration also will push the International Energy Agency to coordinate releases from reserves by other oil-consuming nations. The organization will meet within days, two people familiar with the matter said.
U.K. Business Secretary Kwasi Kwarteng is considering proposals for his nation to join the effort, according to a person familiar with the matter. The person declined to say what amounts of oil the country would release from its reserves.
But the releases won’t be accompanied by greater production from OPEC+ nations, after the cartel said Thursday it’ll stick to gradual increases. OPEC+, which includes Russia, ratified an existing plan to increase supply in May by 432,000 barrels a day in an online meeting, according to a statement.
The goal of Biden’s plan is to create a bridge for U.S. supply until the fall, when domestic production is anticipated to increase, the White House said.
Historic Release
OPEC+’s refusal to increase its own production may blunt any effect of the U.S. release, the largest by far in the history of the Strategic Petroleum Reserve.
“It is hard to overstate the scale of this intervention if it bears out,” Kevin Book, managing director of ClearView Energy Partners, said in a research note. “It would be the largest draw-down volume announced in the 45-year history of the SPR by a factor of 3.6x.”
OPEC+’s decision to stick with plans for a gradual supply increase was in line with expectations. Riyadh has prioritized its relationship with Moscow, which co-leads the OPEC+ alliance, and the cartel insists there’s no shortage of oil in the market.
Yet U.S. gasoline prices are near record highs, even after Biden previously announced releases totaling 80 million barrels in November and March.
The administration also plans to issue waivers of a U.S. law, the Jones Act, that requires oil to be transported between American ports only by U.S.-built, -flagged and -operated vessels. That will ensure the flood of reserves are delivered in an orderly and timely manner, a senior administration official said.
The government will take waiver requests seven days a week and aims to process them within two days, the official said.
The move had been encouraged by leading oil refiners, according to two people familiar with the matter.