When President Joe Biden ordered the release of 50 million barrels of oil from America’s strategic reserve to help reduce energy costs, he was taking aim at a growing burden for millions of Americans embarking on Thanksgiving travel.
The idea is that by putting more oil on the market, prices will fall. That hasn’t happened yet. But depending on what happens in the rest of the world, there’s still a chance it could work.
Oil prices rose slightly after the announcement. Traders were anticipating the news, and may have been underwhelmed by the details, said Claudio Galimberti, senior vice president for oil markets at Rystad Energy.
The likelihood of providing meaningful relief in the near future, however, is probably low. Still, any help in easing fuel prices, even modestly, would be welcomed by many Americans.
If OPEC decides next week that it wants higher prices, its members could take oil off the market. “Just overnight, they could just offset it,” Burkhard said. “So that’s a big question mark, is how they react to this.”
What many consumers want to know is what’s going to happen to gasoline prices at the pump. Many factors go into the price of gasoline. Refineries buy crude oil in advance, so they’re still working with more expensive oil, and states have differing tax rates that impact the price.
“Really, what we’re talking about are the most price-sensitive consumers in the economy,” Book said. “They may not show up in GDP numbers or recessions, but they show up in vote counts as marginal voters, who may or may not respond in the next election cycle, and I think if we get down to it that’s really what this is about.”
The future of oil and gas in the US is a political flashpoint and source of tension, especially as companies and government agencies grapple with climate change and the transition to cleaner sources of energy.
The oil and gas industry employs more than 10 million people in the US and contributes about 8% of the nation’s gross domestic product, according to the American Petroleum Institute. Any impact resulting from Biden’s release of oil from the strategic reserves “is likely to be short-lived unless it is paired with policy measures that encourage the production of American energy resources,” the API said in a statement.