Biden plan to tap strategic oil reserve ignores own role in soaring gas prices, critics say
While Dems voted for sweeping taxes and fees on the oil and gas industry in Build Back Better Act, Fla. Gov. DeSantis has proposed freezing state gas taxes.
November 24, 2021 1:50pm
Updated: November 24, 2021 4:23pm
President Biden's plan to release crude oil from the U.S. Strategic Petroleum Reserve won't lower gas prices, isn't a solution, and ignores the policy drivers at the root of the self-inflicted problem, critics argue.
While Democrats voted for sweeping taxes and fees on the oil and gas industry in the Build Back Better Act, which will further drive up costs nationwide if enacted, Florida Gov. Ron DeSantis, a Republican, has proposed freezing the state's gas and fuel taxes.
Under Biden, gas prices recently reached a seven-year high. The national average price for regular gasoline was $3.41 a gallon, and for diesel, $3.64 a gallon, as of Monday, Nov. 22, according to AAA.
The White House plan includes releasing 50 million barrels of oil from the Strategic Petroleum Reserve to lower gas and fuel prices to "address the mismatch between demand exiting the pandemic and supply."
First, 18 million barrels will be released over the next several months, a move previously authorized by Congress. Second, another 32 million barrels will be released through an exchange — required to be returned to the reserve — potentially costing those who purchase it more money.
Andrew M. Lipow, CEO of Houston-based Lipow Oil Associates LLC, explains that Biden's plan doesn't actually get more oil out of the ground — it moves it back and forth from the reserve.
The reserve currently has 606 million barrels. The 18-million-barrel sale is "a sale of oil that had already been approved by Congress as part of the deficit reduction legislation," Lipow says.
"So the oil market 'knew' that this amount of oil was going to be sold anyway," he adds, explaining why Biden's announcement didn't have an effect on the market. "Since refiners have already bought their oil supplies for December, it is unlikely that this sale will have any supply impact on the market until January."
As for the 32-million-barrel exchange, it "is a loan of crude oil," says Lipow, meaning those who purchase it between January and April of next year will have to pay it back "sometime between 2022 and 2024."
"For example, the way the program works is if you receive one barrel of oil in January of 2022, you might have to return 1.2 barrels in December 2023 because oil is worth much more in January of next year than it is in December of 2023," Lipow explaines. "So this part of the release does not get more oil out of the ground, it just moves supply into the near term."
Biden's plan will only release three days' worth of oil and isn't "a real solution to our energy crisis," said House Minority Leader Kevin McCarthy (R-Calif.).
The real solution to the energy crisis "is to let America produce the energy we have and need," McCarthy tweeted.
Meanwhile, Biden's plan reverses gains made by former President Trump who replenished the Reserve for the first time in many years.
Trump said the Reserve is supposed to be used only for emergencies like war, not for a self-inflicted energy crisis.
"For decades our country's very important Strategic Oil Reserves were low or virtually empty in that no President wanted to pay the price of filling them up," Trump said in a statement. "I filled them up three years ago, right to the top, when oil prices were very low. Those reserves are meant to be used for serious emergencies, like war, and nothing else."
Biden's plan is "an attack on the newly brimming Strategic Oil Reserves so that he could get the close to record-setting high oil prices artificially lowered," the former president charged.
"We were energy independent one year ago, now we are at the mercy of OPEC, gasoline is selling for $7 in parts of California, going up all over the Country, and they are taking oil from our Strategic Reserves. Is this any way to run a Country?"
Daniel Turner, founder and executive director of the nonprofit Power the Future, traces the steep rise in prices at the pump to a series of Biden administration actions reducing domestic energy supply.
"The current energy emergency is a self-inflicted wound that will only be fixed when we're allowed to increase our domestic supply and get back on the road to energy independence," said Turner.
"Make no mistake, Russia, China and OPEC are all laughing as the Biden Administration stumbles in the disaster of its own creation," he added. "Today's news is the equivalent of spending all your savings at the casino, tapping the retirement account for back-up and then seeking praise for fiscal discipline."
Since taking office in January, Biden's anti-U.S. energy agenda, PTF argues, includes canceling the Keystone XL Pipeline, freezing new leases for oil and gas production on federal land, waiving sanctions on the Nordstream 2 gas pipeline between Russia and Germany, and imposing a range of other restrictions on U.S. oil production.
Meanwhile, DeSantis proposed freezing state gas taxes on Monday, a move the Florida legislature will address when it returns in January. He also called on fuel stations to cut prices by 25 cents a gallon statewide.
DeSantis said he also spoke with executives at several large, Florida-based gas stations who all agreed to lower gasoline prices along with the tax cut.
DeSantis, who has criticized Democrats who voted for Biden's infrastructure bill including his challenger, Rep. Charlie Crist, points out that it includes a pilot program to tax American drivers per mile.
"This is potentially even more burdensome than any gas tax, with more harmful implications for federal government surveillance and control," he said. "How does Crist reconcile this proposal with his empty rhetoric about cutting gas prices?"