US President Joe Biden, faced with record inflation undermining his popularity, will tap into America’s huge oil reserves as never before to try to stem soaring prices at the pump.
He ordered to draw 1 million barrels a day from strategic oil reserves for six months, an initiative “unprecedented” in American history, the White House announced Thursday. The prospect of this record spill of American black gold was already lowering prices on Thursday in London and New York by around 5%.
Encourage extraction on American soil
According to a statement from the US executive, this initiative should serve to “make the transition until the production [américaine] increases at the end of the year. The US administration will use the revenue from the sale of these reserves to replenish stocks “in years to come”.
The White House, which the Republican opposition accuses of weighing down oil activity in the United States, promises to “do everything [qu’elle] can” to encourage extraction on American territory. Joe Biden, for example, is now asking Congress to impose fines on companies that have the necessary permits and land, but which do not operate them.
The specter of legislative elections
Still with the idea of strengthening American energy independence, the president will invoke the “Defense Production Act”, a text inherited from the Cold War which allows him to take economic decisions by decree, to encourage the development of green energies.
The 79-year-old Democratic president has been trying since the invasion of Ukraine to lay the blame for soaring inflation on Russian President Vladimir Putin, even though the rise in prices had started before. But this rhetoric does not seem to convince Americans, as legislative elections approach in the fall which threaten to reduce Joe Biden to impotence for the rest of his mandate.
Reserves exploited since the fall
His confidence rating barely exceeds 40%, according to various polls, a very low level. The US Strategic Petroleum Reserves were created in 1975 to counter oil shocks. Buried in huge salt caverns up to 800 meters deep along the coast of the Gulf of Mexico, they can store up to 714 million barrels of black gold but currently hold 568 million barrels.
The American administration has already been drawing continuously from these strategic reserves since the fall, when the rise in oil prices took hold: it announced in November that it wanted to release 50 million barrels, then again 30 million at the start of March.
6.4% year-on-year price increase
According to the latest inflation indicator, the PCE index published Thursday by the Department of Commerce, consumer prices continued to climb in March in the United States, rising by 6.4% over one year and 0, 6% over one month. With the approach of the mid-term legislative elections, the White House has made the fight against this runaway price, never seen since the 1980s, one of its priorities.
Tapping even more into strategic reserves can help, but “the market is currently flooded with news moving prices up or down,” recalls John Kilduff. The initiative of the Biden administration would have all the more impact if “other countries also step up to the plate”, underlines the specialist, regretting that the members of OPEC + “are not moving for the moment the small finger”.
OPEC refuses to help stabilize prices
The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and their ten allies led by Moscow (OPEC+), in fact agreed on Thursday to a new opening of their black gold floodgates but very modest: around 432,000 barrels per day for the month of May.
The international community had however multiplied the calls for them to pump more cheerfully and thus calm the volatility of prices. On March 7, oil reached its historic price records reached during the 2008 financial crisis, exceeding 130 dollars a barrel before falling back to between 100 and 110 dollars currently. The price of gasoline at the pump in the United States exceeded its 2008 peak, well above 4 dollars per gallon (3.78 liters).
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