For the next six months, the Biden administration will discharge 1 million barrels of oil each day, not just for the scent, but also to flood the market with supply and bring down soaring gas prices.
This is the largest release from the Strategic Petroleum Reserve (SPR) ever declared by the United States, demonstrating how politically sensitive the subject of gas prices is for the Biden administration.
How did we end up here?
Oil prices were already rising before the crisis in Ukraine, but when Russia decided to invade, many Western governments boycotted a portion of its energy supplies, forcing prices to skyrocket.
The national average price of a gallon of gas has risen to $4.23 from $2.87 last year.
What are the responsibilities of these reserves?
The SPR was established in 1975 in response to yet another severe economic shock: the Arab oil embargo. To ensure that such shortages never happened again, the US government built up a massive crude oil store along the Gulf Coast for rainy days.
Recently, there have been a slew of them. In the previous six months, the US has used the SPR three times to bolster thirsty energy markets.
So, will releasing the reserves be successful? Oil prices, on the other hand, fell by 7% yesterday. Consider it like sipping a 5-Hour Energy after pulling an all-nighter: According to Goldman Sachs, it should help to stabilise oil prices this year, but don’t mistake it for a long-term solution to broader supply issues.