Joe Biden is ordering the largest release of oil in history from the U.S. Strategic Petroleum Reserve and vowing to punish some fossil-fuel companies that refuse to ramp up production, in a bid to push down skyrocketing inflation amid Russian President Vladimir Putin’s war on Ukraine.
But the U.S. President said Thursday that the ultimate solution to his country’s energy woes is to decarbonize the economy, as he tried to square his short-term boost to the oil and gas supply with long-term plans to fight climate change.
Mr. Biden told reporters at the White House that he would release one million barrels of oil daily for the next six months, a total of more than 180 million barrels. The U.S. last year consumed about 20 million barrels daily. He said average gasoline prices had risen by US$0.90 a gallon, or US$0.25 a litre, since the start of the year.
“Putin’s war is imposing a cost on America and our allies and democracies around the world,” Mr. Biden said. “Your family budget to fill a tank, none of it should hinge on whether a dictator declares war.”
Mr. Biden also called on Congress to impose a “use it or lose it” policy on oil and gas companies that hold drilling permits on federal land. Companies should pay financial penalties for every unused lease as an incentive to produce more, he said.
“Some companies have been pretty blunt: They don’t want to increase supply because Putin’s price hike means higher profits,” the President said. “I say enough. Enough of lavishing excessive profits on investors and payouts and buybacks when the American people are watching, when the world is watching.”
The country has been hammered since last fall by the highest inflation rates in four decades. Russia’s invasion of Ukraine has further pushed up oil and gas prices. The U.S. and Canada have both imposed embargoes on Russian oil and petroleum products.
The higher prices have translated into both pain at the pump for American drivers and increased costs for companies. Mr. Biden faces tough midterm congressional elections later this year, in which his Democratic Party is trailing the Republicans in polls and risks losing control of both houses of Congress.
The price of West Texas Intermediate crude, the North American benchmark, slipped on Thursday in the face of the announcement. Stocks in oil companies, however, rose – signalling that the market realizes the drop in prices will be only temporary, said Laura Lau, chief investment officer with Brompton Group.
“It’s kind of a last-ditch attempt to try and bring oil prices down,” she said. “It is definitely very political.”
Oil prices are high enough to signal to producers that they should increase their output, she said, and the U.S. market has already seen a slight uptick in supply.
Mr. Biden tried to blunt environmental criticism of his push for more oil and gas drilling by emphasizing that his larger goal is still a transition to cleaner energy. “We need to choose long-term security over energy and climate vulnerability,” he said. “Ultimately, we and the whole world need to reduce our dependence on fossil fuels.”
The President signed an executive order Thursday securing production of critical minerals used in high-capacity batteries, in a bid to reduce U.S. reliance on Chinese supply. He also touted tighter energy-efficiency standards for home appliances and billions of dollars of spending to retrofit older buildings.
Mr. Biden has already rejected calls from Republicans that he reverse his moratorium on new drilling leases on federal land and from Canada that he rescind his cancellation of the Keystone XL pipeline. The White House has said that it is looking only for short-term supplies, not to build long-term oil and gas infrastructure.
Canada is already eyeing a 5S-per-cent boost in oil exports to the U.S., in a bid to help replace some of the supply that would otherwise have come from Russia. There is no Canadian equivalent to the U.S.’s Strategic Petroleum Reserve, which stores oil in Texas and Louisiana to be released to shore up markets, meaning Ottawa has limited ability to order immediate supply increases.
The U.S. fossil-fuel industry pushed back at Mr. Biden’s demands Thursday, contending that the obstacle to ramping up production was government red tape and not corporate greed.
“American energy companies have paid significant funds for leases and have every incentive to produce energy where they can. However, it takes years and many permits to explore for energy and even then, not every well drilled on a federal lease is ultimately suitable for energy production,” Marty Durbin of the U.S. Chamber of Commerce said in a statement.
Anne Bradbury, CEO of oil and gas trade association AXPC, said pulling crude from reserves would not lower prices in the long term, “and may even do more harm than good.”
“The better approach to help alleviate rising energy prices is to focus on supporting domestic production of oil and natural gas,” she said in a statement.
OPEC and allied oil producers, meanwhile, signalled Thursday that the U.S. cannot look to them for help. They decided to continue ramping up production slowly, adding 432,000 barrels a day in May, only a small increase from 400,000 barrels in earlier months.
In a bid to get more oil fast, the U.S. had previously asked Saudi Arabia and Venezuela to increase production quickly, to no avail. These moves drew fire for Mr. Biden, who has previously criticized human-rights abuses by authoritarian regimes in those countries.
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