The Biden administration announced plans on Thursday to release 180 million barrels of oil from the Strategic Petroleum Reserve (SPR) during the next six months, as a part of efforts to lower gas prices. While this release is historic in its proportions — the biggest one ever — it will unfortunately do almost nothing to change the gasoline prices during the next couple of months.
Injecting approximately 1 million barrels of oil per day into the U.S. market sounds like a lot, but is in fact just 5 percent of our daily consumption of about 20 million barrels. As crude oil is a globally traded commodity, this injection is not affecting just the U.S. market, but is instead diluted over the entire world consumption. That consumption is huge: Each day, the world uses about 100 million barrels of oil, and the entire release from SPR corresponds to less than two days’ worth of global oil consumption. A U.S. president can do many things — but single-handedly increasing the global supply of crude oil is not one of them.
How could the Biden administration lower gas prices at the pump? As its impact on crude oil supply is minimal, and the costs of refining and local distribution are rather fixed, the government has only one tool available to it: lowering taxes on gasoline. This proposal has already been touted, but the problem with low U.S. gas taxes is that they cannot be lowered much more. Current federal gasoline tax was last increased 30 years ago and is still a measly 18.4 cents per gallon, and even eliminating would not bring the pump prices down much. In states with higher gasoline state taxes, state governments can have more of an impact — but it still is not much.
Should Biden be seeking to lower gas prices at all? For an administration that portrays itself as serious on climate issues, the increase in global oil prices is opportune: nothing else makes Americans drive less. However, the pain of these costs is not evenly spread — high energy costs are a form of regressive taxation, as they affect the poorest drivers the most. This problem could be resolved by monthly gas vouchers — but only for low-income drivers. After all, the complaints of drivers owning $60,000 SUVs about high gasoline prices ring hypocritical.
To be sure, a war in distant Ukraine is not the best way to plan an energy transition. But no good crisis should be wasted, and this tragedy parallels the Yom Kippur War between Israel and Arab states in 1973 in its impact on the global energy markets. The ensuing Arab Oil Embargo precipitated some of the highly progressive and energy-efficient policies of the Carter era, such as e.g., the introduction of fuel-efficiency standards and the creation of SPR and the Department of Energy.
Does Biden have the political courage of Carter? America must face the reality that most of the world’s exportable oil today comes from countries increasingly excluded from energy markets (first Iran, and now Russia) and their uneasy allies such as Saudi Arabia and UAE who have proven reluctant to make up the shortages. Biden now faces a momentous choice. He can lower the prices on the pump by intervening in the world politics rather than oil markets: A truce with Russia and Iran would restore their inputs into the global energy market. Alternatively, he can extend the moral high ground to the home-front on climate change, and lower gasoline prices only for those in the greatest need. This may cost him politically — but may also place him into history books as the president to turn the U.S. away from oil.
Ognjen Miljanić is a professor of chemistry at the University of Houston, where he teaches on energy and sustainability. Follow him on Twitter: @MiljanicGroup