Washington is drafting a plan to release roughly a million barrels of oil a day from U.S. reserves, for several months, to combat rising gasoline prices and supply shortages. The total release may be as much as 180 million barrels.
The U.S. release may be announced as soon as Thursday. The plan is accompanied by a diplomatic push for the International Energy Agency to coordinate a global release by other countries. A final decision hasn’t been reached on the global release.
While the U.S. Government was considering the plan to release oil from its reserves, West Texas Intermediate futures dropped as much as 5.5% today.
The potential move comes as OPEC+ resists pressure from the U.S. to boost output to ease prices. Riyadh has prioritized its relationship with Moscow, which co-leads the OPEC+ alliance, and the cartel insists there’s no shortage of oil in the market.
The group meets on Thursday, and is expected to approve just a modest increase of supply. This puts Biden under pressure to slow the pace of inflation, and reduce gasoline prices in particular; with the approach of U.S. midterm elections in November. The cost has risen dramatically despite the administration’s assurances last year that pump prices would fall in 2022.
Biden has already ordered two large releases of oil from U.S. reserves in the past six months, the average pump prices rose after the administration began discussing its first release last fall. The national average price is $4.24 per gallon.
Biden also announced an agreement with the European Union to provide the bloc with 15 billion more cubic meters of liquefied natural gas this year, to reduce the continent’s dependence on Russian supplies.
Russia, is the world second biggest crude oil exporter, and provides the EU with more than 40% of its total gas consumption, and also accounts for 27% of oil imports and 46% of coal imports, according to EU figures.
EU nations have been putting in place plans to phase out their dependence from Russian energy exports.
The Biden administration has struggled to coax OPEC nations to increase production enough to reduce U.S. gasoline prices. As of March 25, the reserve had 568 million barrels remaining, according to Energy Department data.