President Joe Biden is ordering the release of 1 million barrels of oil per day from the nation’s strategic petroleum reserve (SPR) for six months, or 180 days, in a bid to control energy prices. It is the largest such release from the stockpile in history; however, the stockpile is at its the lowest level since 1984.
The latest amount of U.S. oil release would make 180 million barrels of oil available, or the equivalent to about two days of global demand, and would mark the third time the United States has tapped the SPR in the past six months.
Will this lower your gas prices?
Let’s start with some facts and an overview of strategic oil reserves. The Strategic Petroleum Reserve is an emergency stockpile of petroleum maintained by the United States Department of Energy. It is the largest known emergency supply in the world, and its underground tanks in Louisiana and Texas have capacity for 714 million barrels.
The United States created the Strategic Petroleum Reserve in 1975 after the Arab oil embargo spiked gasoline prices and damaged the U.S. economy. Presidents have tapped the stockpile to calm oil markets during war or when hurricanes hit oil infrastructure along the U.S. Gulf of Mexico. The U.S. also maintains small heating oil and gasoline reserves in the northeast.
As an example, President George W. Bush authorized the release of oil from the SPR due to Hurricane Katrina's effects on oil refineries in the Gulf Coast.
To the burning question, will releasing 1 million barrels a day lower your gas prices?
Analysts have warned a release from the Strategic Petroleum Reserve would only produce a short-term effect, as it would not increase U.S. production capacity. This dumping is about nine days’ worth of demand, but even less because a barrel of crude from the Reserve does not equal a barrel of gasoline. Not all oil can be converted to heptane or diesel.
The U.S. consumes about 20 million barrels of oil per day. The average cost of gasoline declined to $4.23 a gallon Thursday, a roughly 2.1% decrease compared to two weeks ago.
The Bottom Line
The country with the most gas and oil is strategically the strongest in the world because it can outlast their opponents. This is true with many other items, including food.
As an expert on the automotive industry, I do not foresee 1 million barrels of oil a day moving the price of gasoline in the slightest. You may see a few cents drop over a few months, but prices will increase again if more oil and gas is not produced in the U.S. to make up for the shortfall.
Beig energy independent is the best choice.
On top of all of this, the government is planning to add additional 11 new tax hikes on the oil and gas industry, and this will not incentivize the big producers in the industry to increase production.
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