U.S. to release oil reserves as the holiday travel season gears up
STEVE INSKEEP, HOST:
The Biden administration says it plans to release 50 million barrels of oil from the Strategic Petroleum Reserve. Drivers, of course, have been hit with higher gasoline prices this year, and President Biden views this as a response. NPR's Jeff Brady joins us. Jeff, good morning.
JEFF BRADY, BYLINE: Good morning.
INSKEEP: What's the White House doing here?
BRADY: Well, the Strategic Petroleum Reserve, it was created to cushion big oil shortages like the country saw in the 1970s. It wasn't really meant for situations like this, but gas prices are up. And Biden is doing what he can to push them back down. A year ago, the national average for regular gas was $2.10 a gallon. Today, it's $3.40. And the reasons for this - these price increases are clear. During the pandemic, we all traveled a lot less and used less gas. Now more people are vaccinated and feeling comfortable traveling again, so demand for gas and the oil that it's refined from are up. But the crude oil supply just hasn't kept pace with the demand. So the administration will release 50 million barrels of oil from the reserve, most of that from under an exchange program. That means it'll flow onto the market now and then oil companies will replace it later. Also 18 million barrels will come from direct sales that Congress already approved. The administration is pushing up the date to get more oil on the market as soon as possible.
INSKEEP: You know, I've been through a few of these shortages, so I have to ask, Jeff, just because more barrels of oil are released increasing the supply, does that mean that ultimately there will be lower prices at the gas pumps for people?
BRADY: Well, you know, just the rumors that this announcement was coming pushed oil prices down in recent days. But it takes a while for that oil to make it through the system. It has to be refined and then transported to your local gas station. So there really hasn't been much relief yet. President Biden last week did ask the Federal Trade Commission to look for any illegal behavior that might be keeping prices high. And that move, it's viewed skeptically among oil industry watchers. It's something that presidents have requested in the past when prices are high, but nothing usually comes from those investigations. Still, overall, oil is the biggest component in what makes up gasoline prices. So that should bring prices down eventually. Already this morning, crude prices for January dropped sharply on the news, but then they recovered a little bit.
INSKEEP: Yeah, it's interesting. Just the other day, the president, of course, was in Glasgow, Scotland, as were U.S. diplomats, urging stronger responses to climate change, carbon neutral future and of course less and less use of fossil fuels. That's the long-term goal, but the short term seems to be something else.
BRADY: Yeah. The president is feeling pressure to do something because Democrats are worried, especially going into the midterm elections next year with these high gasoline prices. The administration says this is a short-term solution, a bridge to get the country past this period of high prices now and to the future in a couple of months when supply will more closely match demand and prices should come back down. Now, on that climate question, this is a little confusing because the president has an ambitious goal, the big one being zeroing out greenhouse gas emissions by the middle of this century. No president has aimed for that before. But even the Biden administration sees the country using fossil fuels for decades to come as this big transition to cleaner sources of energy takes place.
INSKEEP: Can I mention one other part of this announcement, Jeff? The United States said it's releasing 50 million barrels from its Strategic Petroleum Reserve, but it's a global market and this seems to be a global response.
BRADY: Yeah, and some other countries are going to announce they're releasing oil, too. China, India, Japan, South Korea and the United Kingdom - these are all countries that use a lot of oil, and their citizens are also facing high prices right now.
INSKEEP: NPR's Jeff Brady, really appreciate it. Thanks.
BRADY: Thank you. Transcript provided by NPR, Copyright NPR.