What Is The United States Strategic Petroleum Reserve?

Dallas – US President Joe Biden has once again tapped into the country’s oil reserves to try to contain rising energy prices.

This Thursday, the White House reported that Biden ordered the release of one million barrels of oil from the strategic reserve each day for the next six months.

In addition, Biden will ask Congress to impose financial sanctions on oil and gas companies that have exploitation concessions on public lands but do not produce energy.

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In this way, the government hopes that the use of the oil reserve will buy time and reduce gasoline prices until domestic producers can increase production.

In fact, world oil prices were rising even before Russia invaded Ukraine in February.

When Biden announced that he would ban Russian oil imports in early March, he recognized that this move would come at a cost to American consumers.

This is the third time that Biden has tapped into the strategic oil reserve in just over four months.

In November, he ordered the release of 50 million barrels of oil. Then, at the annual State of the Union address in March, he announced another 30 million barrels as part of a multinational effort to increase crude supply.

Going into the reserve is one of the few things a president can do on his own to try to control inflation, which impoverishes Americans and often creates a political liability for the party that controls the White House.

Here’s a look at what it entails:

What is the oil reserve?

The United States Strategic Petroleum Reserve is a set of underground salt caverns in Texas and Louisiana that can hold more than 700 million barrels of oil, although it is not currently at full capacity.

According to the US Department of Energy, the reserve had about 568 million barrels last week, and more than 650 million barrels in mid-2021.

This reserve was created after the Arab oil embargo of the 1970s so that the United States would have a supply that it could use in an emergency.

What is it for?

Although the United States currently exports more oil than it imports, the reserve remains and has been used for a variety of reasons, from offsetting the impact of hurricanes and shipping channel closures to raising money to reduce the deficit.

In 1991, President George HW Bush authorized the use of almost 34 million barrels from the reserve during the Gulf War, although only 17 million barrels were used. In 2011, President Barack Obama approved the release of 30 million barrels to compensate for shortages in Libya.

How do they get the oil out?

Because oil is lighter than water, water is pumped into salt caverns, causing the oil to float to the surface, where it is captured to be piped to refineries.

Why is Biden turning to the reserve?

By supply and demand. Biden hopes that as more oil circulates in the market, prices will fall. In November, when he announced the use of the reserve, prices fell for almost two weeks, but then rose again. US crude is up nearly 40% this year and has become even more volatile in the past month.

Whether this latest measure by Biden will work will depend on several factors. One factor to keep in mind is that while 1 million barrels a day is a huge amount of oil, the United States used almost 20 million barrels a day last year, and global consumption exceeded 97 million barrels a day.

Will the price of gasoline go down?

What most want to know is what is going to happen at the gas stations.

There are many factors that influence the price of gasoline. Refineries buy crude in advance, so they could continue to work with more expensive oil. The taxes that each state applies to consumers also have an influence.

On Thursday, the national average price for a gallon of regular gasoline was more than $4.22 ($1.11 a liter), down about 10 cents a gallon from its high in early March, according to the AAA automobile club.

The average is still less than $4 a gallon in many Midwest states, but it is higher in the Northeast and higher in the West. In California, the price per gallon is $5.90 dollars ($1.55 per liter).

Even if those prices don’t go down, Biden can argue that by turning to the reserve he was trying to help.

Who gets hurt the most?

Gasoline prices are regressive; that is, people with lower incomes tend to spend a higher percentage of their money on gas than well-off Americans, so the increases hurt more price-sensitive consumers. According to Kevin Book, CEO of Clearview Energy Partners, these consumers may not appear in the measurements of the country’s economy, “but they do appear in the vote count … if we focus on that, it is what is really treats”.

Why is oil important?

The future of oil and gas in the United States is a hot political issue and a source of tension, especially as companies and government agencies grapple with climate change and the transition to cleaner energy sources.

On the one hand, the US oil and gas industry has been praised by some political leaders for creating independence in the energy sector. In the past, the United States relied heavily on imports, but now other nations rely on the United States for oil.

It’s also a job creator: The oil and gas industry employs more than 10 million people in the United States and contributes 8% to the country’s gross domestic product, according to the American Petroleum Institute (API). English).

Rising prices benefit the companies that supply oil, but consumers don’t like those higher prices reflected at gas stations.

The API has previously stated that any release of oil from the strategic reserve must be accompanied by policy measures that encourage more energy production in the United States. This contravenes Biden’s promise to reduce reliance on fossil fuels that contribute to climate change.

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