If you’ve filled your car’s gas tank at any point over the past several months, you probably noticed afterwards that your wallet felt quite a bit lighter than it used to.
Nationally, gas prices have reached an average of $3.41 a gallon, a seven-year high, and $1.28 higher than a year ago.
(In Kansas, gas prices have fallen 3.6 cents per gallon in the past week, averaging $3.08 per gallon.) As the COVID-19 pandemic has begun to wane and businesses are reopening, gasoline demand has risen steadily but oil supply has not kept pace.
Russia and OPEC, the cartel of 13 primarily Middle Eastern and African oil exporters, have declined entreaties from Europe and the United States, including direct appeals by President Biden, to produce more oil to help bring prices lower. Ordinarily, that might not be such a big deal, since over the past decade or so the United States has become the world’s largest oil producer itself, with an average of more than 12 million barrels a day in 2021. But oil giants in the U.S. have been only slowly ramping up production since the pandemic sent demand plummeting in 2020.
The results are a tight oil market, higher prices at the pump and a major political liability for Biden as the U.S. barrels forward into the frenzy of next year’s midterm elections. As such, Energy Secretary Jennifer Granholm has told reporters that Biden is considering using one of the only tools he has at his disposal: tapping into the nation’s Strategic Petroleum reserve to increase the crude oil supply. Allies in Congress have urged him to do so as well.
He shouldn’t. Sure it’s tempting to tap the oil reserves as a quick adrenaline hit to a too-tight global oil market, but it would be shortsighted.
The petroleum reserves store roughly 620 million barrels of crude oil in underground caverns in Texas and Louisiana, the largest emergency supply in the world. The U.S. can draw down up to 4.4 million barrels per day, and it takes about 13 days for the oil to reach the market. The new oil would eventually lead to lower prices at the pump, but experts warn that any such relief would be fleeting.
The last time the U.S. dipped into its reserves in 2011, crude prices dropped by 6 percent on the day of the announcement and another 1.2 percent the following day, according to the Wall Street Journal. Two weeks later, oil was $4.66 a barrel — more expensive than before the drawdown. While it’s possible that the U.S. can persuade other countries to coordinate a release of oil from their reserves — which Biden has asked Japan, China, and India to do — it would have to be a massive amount to cause global prices to dip. World consumption of oil averages nearly 100 million barrels a day.
The White House has previously only directed emergency drawdowns of the reserves because of violent Middle East conflicts that disrupted oil supply: Libya in 2011 and the Gulf War in Iraq in 1991, or natural disasters, such as in 2005 after Hurricane Katrina depleted about a quarter of U.S. production. Drawing down the reserves in an attempt to manipulate the global market because of a political crisis would defeat the purpose of having the reserves in the first place. They were created in the 1970s after the oil embargo, when, unlike today, America was a relative minor oil producer and deeply dependent on foreign crude.
Biden also recognizes that there are market forces beyond his control. In a letter to the Federal Trade Commission, Biden requested an investigation into potentially “anti-competitive behavior.” He questioned how wholesale gasoline prices were down 5 percent over the past month while prices at the pump were up 3 percent. He also pointed to the fact that companies such as Exxon Mobil and Chevron are on track to double their profits this year compared with 2019. The pressures oil companies are facing are complex, and made more unpredictable by the Biden administration’s welcome insistence that America reduce its dependence on oil. But when oil companies decide to limit the supply so they can enjoy more profits, people have a right to scream about prices at the pump.
Weeks ago, Biden was in Glasgow advocating for global greenhouse gas emissions standards while also begging OPEC and Russia to release more oil supply. Spiking oil prices are par for the course in this liminal period when the world is still heavily reliant on the boom-bust cycle of oil markets while also beginning a transition to renewable energy. Oil prices are notoriously fickle and the Energy Information Agency predicts that they will start to fall next year, even without government intervention. Biden should withstand the political heat and allow the market to self-correct.
