Average U.S. gasoline prices hit $3.89 a gallon on October 17, up about 20 cents from a month ago, 56 cents higher than last year at this time, and $1.35 a gallon higher than when Biden took office on January 20, 2021. In March, gasoline prices hit $4 a gallon and then moved up to a record $5 a gallon in June. According to the White House, it plans to take action to prevent those high prices from occurring again. As the mid-term election approaches, the Biden administration is reportedly preparing to sell the 14 million barrels of Strategic Petroleum Reserve oil leftover from its 180-million-barrel SPR release program that began in May. It may also release an additional 26 million barrels of SPR oil in fiscal 2023 that began this month, which is required by Congress to raise money to pay for some of its earlier spending. The administration has a few weeks before the midterms to try to lower gasoline prices, or demonstrate that it is trying to do so.
The Department of Energy (DOE) is also supposed to release this week further details on eventually refilling the SPR. The administration spoke with energy companies about buying back oil through 2025 to replenish the oil it sold from the SPR. The Biden Administration had also asked Saudi Arabia to hold off on OPEC+ production cuts until after the midterm elections, suggesting that the United States would buy 200 million barrels of oil to fill the SPR in return.
In May, the DOE said it would launch bids late this year for a buy-back of about one-third of the 180 million barrel sale, supposedly linking deliveries to lower oil prices and lower demand, likely after fiscal year 2023, which ends September 30, 2023. The Biden administration also urged oil refiners to not increase exports of petroleum products and warned them it could take action if plants do not build inventories. The Biden administration considered imposing a ban on gasoline and diesel exports, but doing so would exacerbate Europe’s energy crisis and raise domestic prices.
While prior administrations have had SPR releases, they have been used to avert short-run price increases due to emergency circumstances, such as the price run-ups during the Persian Gulf War and immediately after Hurricane Katrina. Prior administrations viewed the domestic production of fossil fuels as a positive and necessary objective, compared to Biden’s climate policies that seek to end the use of fossil fuels. Even President Obama boasted about the benefit of U.S. energy production.
Biden’s policies, however, conflict with the administration’s desperate attempts to avoid sharp increases in gasoline prices. At least, that appears to be the case prior to the midterm elections. Biden has imposed constraints on domestic oil production while begging Saudi Arabia for increases in output. Since the latter did not work, Biden released oil from the SPR several times to avoid the political jam that his anti–oil-and-gas policies created, leaving the reserve’s inventory at a 40-year low. U.S. commercial oil in storage is now higher than oil stocks in SPR. While he is manipulating domestic gas and diesel prices by using the SPR, Biden wants to sue OPEC members for “price manipulation.” This is after he restricted supplies by offering the fewest federal acres for oil and gas leasing since WWII.
Despite high market prices, domestic crude-oil production this year is averaging about 9 percent below its pre-pandemic peak of almost 13 million barrels per day. In 2020, the U.S. Energy Information Administration was forecasting that the United States would be producing more than 14 million barrels of oil per day in a much lower price environment. Today’s domestic oil production is over 2 million barrels short of that forecast.
According to a study by the Committee to Unleash Prosperity, the United States would be producing two to three million more barrels of oil a day if the Trump energy policies were intact. Biden’s policies of canceling pipelines, reducing drilling permits, and establishing anti-fossil fuel EPA rules are costing the U.S. economy almost $2 billion a week. His climate/tax bill (the so-called Inflation Reduction Act) hits the domestic oil industry with massive fee and royalty increases. Even production on non-federal lands gets hit with a methane tax of up to $1500 per ton. If the Trump policies were still in place U.S. oil production would be nearly five times higher than the amount of oil depleted from the Strategic Petroleum Reserve. The SPR is at its lowest level since the summer of 1984.
Biden is risking U.S. national security by constantly going to the SPR to counter increases in gas and diesel prices that result from his anti-oil and gas policies. He now wants to sell 14 million barrels of oil from the SPR to counter the gas price increases over the past several weeks. His depletion of SPR oil reserves can only last until the stockpiles are exhausted, and replenishing the stockpiles would take years—perhaps the final two years of his current term in office. Until he refills SPR, however, there is little of the type of oil U.S. refiners need left in the SPR to counter the price increases resulting from his continued anti-oil and gas policies. That means that by “high-grading” the SPR of the oil refiners can easily process, the United States is left with less desirable product should a real emergency result. The increased royalties and rents in the Inflation Reduction Act have yet to show up in consumer prices, so the combination of all of these policies will translate to higher prices for Americans after the November election.
Unlike the president’s short-term SPR releases, changing his policies to be pro-oil and gas, producing 2 to 3 million more barrels of oil every day for years to come would be a long-term fix that would actually lower prices for American families and improve the U.S. economy and our national security.