The Biden administration announced last week that it would be tapping into America’s strategic petroleum reserves in order to curb high gas prices. WINK News’ Trust and Verify reporter Lisa Hutson answers your questions about the move.
Strategic petroleum reserves are stockpiles of crude oil maintained by countries like the U.S. WINK News turned to the U.S. Department of Energy, the U.S. Energy Information Administration and Dr. Tom Smythe, professor of finance and economics at Florida Gulf Coast University, for answers.
Eric Mauss asks:
“How is the oil from the strategic reserve released into our economy? Through an oil company? At what price?”
Oil companies will purchase oil from the strategic petroleum reserves. The Department of Energy put out a notice of sale saying it was taking offers until April 12, with the contracts going to the highest bidders. After that, the Department of Energy says that oil is on the market. We have tapped the reserves before, but this will be the largest release of oil reserves in American history.
One million barrels of crude oil are released each day for 6 months, up to 180 million barrels. That’s got to bring prices down, right?
“If Russian oil is shut off, prices are gonna go nowhere but up, I don’t care how many reserves are released into the system,” Smythe said.
Smythe says the European Union is highly dependent on Russian oil, but as the war rages on, the EU is now considering banning Russian oil like the U.S. The Biden administration considers this release a bridge to the end of the year when domestic production ramps up.
But Smythe warns not to expect a dramatic drop at the pump.
“As long as sanctions are in place with Russia, which will likely be much longer than the actual conflict itself, there’s a strong possibility we’re going to continue to see above $100 a barrel for the foreseeable future,” Smythe said.
A historic release of oil from the strategic petroleum reserve will likely not be able to stop rising pump prices, at least not completely.
If you have a question, send it to Lisa Hutson at [email protected]