Overnight Energy & Environment — Biden to release 50M barrels from oil reserve

Welcome to Tuesday’s Overnight Energy & Environment, your source for the latest news focused on energy, the environment and beyond. Subscribe here: digital-staging.thehill.com/newsletter-signup.

Today we’re looking at the Biden administration’s release of oil from the Strategic Petroleum Reserve (SPR), what that will and won’t mean at the pump and some GOP pushback. 

For The Hill, we’re Rachel Frazin and Zack Budryk. Write to us with tips: rfrazin@digital-staging.thehill.com and zbudryk@digital-staging.thehill.com. Follow us on Twitter: @RachelFrazin and @BudrykZack.

Let’s jump in.

DOE to release 50 million barrels of oil from strategic reserve 

The Department of Energy will release 50 million barrels of oil from the nation’s Strategic Petroleum Reserve, the White House announced Tuesday, as the Biden administration seeks ways to control rising costs at the pump.

Of the 50 million barrels, 32 million will eventually be returned to the strategic reserve over the years ahead once fuel prices come down in a bid to ensure the reserve remains stocked, officials said. 

Another 18 million barrels will be released as an acceleration of an oil sale Congress had already authorized.

Tuesday’s announcement was made in concert with China, India, Japan, South Korea and the United Kingdom, which will also tap into their own strategic reserves.

The Biden administration had discussed the strategic reserve option in recent weeks to increase supply as consumers faced higher gas prices amid broader concerns about inflation as the economy rebounds from the coronavirus pandemic.

Read more about the announcement here. 

SO WHAT HAPPENS AT THE PUMP?

Americans are unlikely to see a significant drop in gas prices immediately after the Biden administration’s decision to release 50 million barrels of oil from the nation’s reserve.  

However, several factors are already in play that may drive prices down. 

Like what? The rise in crude oil prices, and to some extent gasoline prices, has already slowed their upward climb amid negotiations in recent weeks, Tom Kloza, co-founder of the Oil Price Information Service, told The Hill.

“Between Thanksgiving, and Groundhog Day, you normally see gasoline prices drop, because essentially, demand drops to about 2 million barrels a day less than it would be in the summertime,” Kloza added.

Patrick De Haan, head of petroleum analysis at GasBuddy, told The Hill that oil prices had already been on the decline ahead of Tuesday’s announcement, and that other factors were also contributing to a reduction. One of the biggest, he said, was an increase in coronavirus cases in Europe, increasing the likelihood of new travel restrictions or lockdowns that would reduce demand.

“Having said that, I think motorists will very soon in the next few days start to see the national average price of gasoline decline and it could decline anywhere from five to 15 cents a gallon over the next one to two weeks, and potentially more,” he said.

But, there’s also Thanksgiving demand.  “I think the fact that Thanksgiving lies ahead is part of the reason why stations haven’t yet started to pass along decreases in prices because they know that millions of Americans will be taking to the road,” De Haan said. “So I think they have an incentive not to pass along the decreases immediately, knowing that one of the busiest travel days of the year is just 24 hours away.”

As demand continues to recover to pre-pandemic levels, Kloza said, spring of next year may bring another sharp spike, due to the fact that “we’re a little bit behind the eight-ball in terms of U.S. refining.”

“This is not the Biden administration’s fault, it’s not the Warren Harding administration’s fault, it’s just the nature of the beast,” he added.

Read more about the anticipated impacts here. 

SPR-ING GOP IRE

The Biden administration’s move to tap into the country’s oil reserves is drawing pushback from several Republicans, including former President Trump.

They say the move sets a bad precedent, and are using the news to blast the Biden administration’s energy policies at large. 

“Those reserves are meant to be used for serious emergencies, like war, and nothing else,” former President Trump said in a statement. 

“Now I understand that Joe Biden will be announcing an ‘attack’ on the newly brimming Strategic Oil Reserves so that he could get the close to record-setting high oil prices artificially lowered … Is this any way to run a Country?” he added. 

As of August, the reserve held more than 621 million barrels of oil. 

The Trump administration floated selling off some of the emergency reserve to pay for Energy Department (DOE) projects last year as part of the presidential budget, but when prices fell amid the coronavirus pandemic it moved to buy oil for the reserve.

And it’s not JUST Republicans…Moderate Democratic Sen. Joe Manchin (W-Va.), while not condemning the sale itself, called it merely an “important policy Band-Aid for rising gas prices” and criticized the administration’s energy policy as “shortsighted” and a “self-inflicted wound.”

Manchin has joined a chorus of Republicans in criticizing the Biden administration over the cancellation of the Keystone XL pipeline construction. Many have also critiqued a now-reversed move to pause new drilling lease sales. 

Neither the leasing pause nor the Keystone permit cancellation were expected to directly impact short-term oil supply. 

WH response:  When asked about the idea that the reserve is supposed to be used for emergencies, White House press secretary Jen Psaki cited the coronavirus pandemic. 

“We’re emerging from a once in a century pandemic and the supply of oil has not kept up with demand as the global economy has emerged from the pandemic,” she told reporters during a Tuesday press briefing. “I would note this is not technically an emergency release, but tailored to market circumstances. The DOE has broad authority to do exchanges.”

Read more about the Republican response here. 

WHAT WE’RE READING

Shale oil’s slower investment sparks new tension with White House, Reuters reports

Colombia’s indigenous activists protect the environment. Now they too are under threat, CNN reports

How the chemicals industry’s pollution slipped under the radar, The Guardian reports

ICYMI

Offbeat and off-beat: Who hasn’t been there

 

{mosads}That’s it for today, thanks for reading. Check out The Hill’s energy & environment page for the latest news and coverage. We’ll see you tomorrow.