It was announced on Thursday, March 31st that President Joe Biden has ordered the release of 1 million barrels of oil per day from the nation’s strategic petroleum reserve for six months.
This action was taken to directly lower energy prices that have spiked in the recent weeks.
The imposed steep sanctions on Russia have resulted in lower oil supply and has caused gas prices to spike significantly.
Although estimated savings are not yet determined, the president suggested it may be anywhere from 10 cents to 35 cents a gallon.
According to the American Automobile Association (AAA), gas is averaging to be about $4.23 a gallon, compared with $2.87 a year ago.
Even though it doesn’t return the prices back to what they were a year ago, it certainly helps the wallets of American families.
According to basic economic principles, the price of goods is governed by demand and supply. Increasing the oil supply will have a direct effect on the price of oil at the gas station which is good news for the public.
However, there was positive news for electric vehicle (EV) owners as well.
The president wants Congress to impose financial penalties on oil and gas companies that lease public lands but are not producing. In addition, the Defense Production will be invoked to support the mining of critical minerals for batteries in electric vehicles.
Since the battery is one of the largest limiting factors on electric vehicles, this action will directly affect the push towards cleaner energy sources.
This announcement did not come without criticism though; Stewart Glickman, an oil analyst for CFRA Research, said the release would bring short-term relief on prices and would be similar to “taking some Advil for a headache.”
As such, the problem of increasing U.S. oil production is still very much at large.
For example, the U.S. is producing an average 11.7 million barrels daily, down from 13 million barrels in early 2020. Biden’s administration has mentioned increasing oil production is a gradual process and this release would provide time to ramp up production.