White House to tap reserves to combat high gas prices amid political pressure on inflation

[BumRushDaShow]

Source: Washington Post

White House officials announced Tuesday that the administration will release government reserves of oil as Republicans repeatedly slam President Biden for high gas prices ahead of the holiday season. The administration said the Department of Energy would release 50 million barrels of oil from the Strategic Petroleum Reserve — an emergency pool kept by the U.S. — in conjunction with several other countries.

While energy experts have consistently said a release of U.S. reserves would likely do little to lower gas prices, the White House said the effort would be undertaken “in parallel” with similar efforts by China, India, Japan, the Republic of Korea, and the United Kingdom.

Average U.S. gas prices stood at $3.41 as of Monday, according to AAA, with costs even higher in some parts of the country such as Pennsylvania and Nevada. It is unclear how much the White House effort would immediately affect prices. Oil prices have begun to tick down independent of the administration’s efforts, in part due to fears of new lockdowns in Europe crimping demand.

“American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand as the global economy emerges from the pandemic,” the White House said in a statement. “That’s why President Biden is using every tool available to him to work to lower prices and address the lack of supply.” A 1975 law gives the president the ability to draw down the reserve in the event of a “severe energy supply interruption.”

Read more: https://www.washingtonpost.com/us-policy/2021/11/23/white-house-strategic-petroleum-reserve/

[JohnSJ]

1. 50 million barrels. It is a large amount. Bigger than both bush and Obama did. Of course

the usual suspects are out there bashing it, with the republicans saying the administration should open more drilling, and the progressives saying we should stop exporting oil to address the problem.

The financial analysts are their usual cynical bunch, many saying it is being done only because of Biden's supposed low approval numbers, but what I think what the critics do not appreciate is this isn't meant to be for a long term solution, but rather to try and moderate prices at the minimum through the holidays.

In addition, the very real risk of the pandemic re-emerging because of the unvaccinated will have an effect, and if OPEC will decrease output to try and offset the release of the Petroleum Reserves.

This is also being co-ordinated with other countries to release their reserves, including China, India, Japan, etc.

It will be interesting what happens

[BumRushDaShow]

3. When Saudi and Russia

were engaged in their oil production/price war (to the point of taking the price/bbl down into the near -$40/bbl territory) basically glutting the market, the U.S. was planning to buy and fill the reserve at the time but the funding for that was removed from a stimulus package. They found another way around it to store the excess (much of it probably what we were producing domestically).

I think that since OPEC's demands last year to Saudi and Russia to quit it and cut the production increases during their price war were ignored, along with the pandemic losses due to major fuel-use drops, OPEC is trying to make up for those losses this year by keeping the production down.

During that whole fiasco last year, which was actually also targeted to kill the U.S. oil production at the time, several U.S. oil companies filed for bankruptcy including this one.

I have watched during the past week before this announcement, where there were reports of the Biden admin working with the other countries to add oil back into the market. Each oil producing company has some set cost per bbl to operate "profitably", so I expect that is being factored in as well. The futures have been bouncing around overnight running in the $76/bbl range.

[JohnSJ]

4. Interesting. Good synopsis. Thanks for the information

[BumRushDaShow]

6. You are welcome!

I won't forget this. I had even captured a screenshot of right around that lowest price/bbl last year -



That was basically the price producers would "pay for storage" of the oil they would have normally "sold".

[oldsoftie]

21. Well, we use nearly 20M barrels a day, so its not a large amount at all. Less than 3 days.

And its also NOT what the SPR is supposed to be used for.
If you want to make a bigger impact, STOP exporting our oil. Especially to CHINA.
The bigger impact will come when the greed hits the ME producers. At some point they wont be able to resist these $80+ a barrel prices and they'll open the spigot a little more.

Of course, WE are also to blame since we DRIVE so much.

[Bengus81]

2. THANK YOU BIDEN for having the GUTS to do what the others won't

Bush.IDIOT could have done this when gas was hitting 4.00 per gallon (6.04 in today's money) in the Midwest all those years ago. IMO just the THREAT of doing it will cause these BOGUS prices to drop because all those setting at their computers playing the commodities market with ZERO ability to take delivery (should be illegal) on 400,000 gallons of gasoline will start selling those futures contracts in mass.

Biden isn't afraid of jack shit or taking the heat,he just does what is BEST for all of us that aren't filthy rich and the 1%ers.

[BumRushDaShow]

7. Agree

I remember when it really DID hit just over $4/gal here in Philly (and we are usually higher than other parts of the country due to PA having the highest gasoline tax (along with the federal one) in the country).

It hasn't hit $4/gal here this go-around by any stretch of the imagination.

Back during the time period you are talking about, there was speculation going on too and eventually there were hearings about it -

Congress rushes to fill oil speculation loophole

Speculation can add $70 to the price of a barrel of oil, critics charge.

June 24, 2008

By Gail Russell Chaddock Staff writer of The Christian Science Monitor
@RussellChaddock

Call it Enron, the sequel. In a scramble to find a fix for energy prices, Congress has tried (and failed) to strip tax breaks from Big Oil, to open protected sites for exploration and drilling, and to jump-start a new era in nuclear power. Now, Capitol Hill is zeroing in on speculators and the legal loopholes that some lawmakers say are adding as much as $70 to the price of a barrel of oil. "Energy speculation has become a fine growth industry and it is time for the government to intervene," said House Energy and Commerce Committee Chairman John Dingell (D) of Michigan, at hearing on Monday.

Fixes in the works on Capitol Hill range from new constraints on speculators – including a 50 percent margin requirement on financial speculators, full disclosure of all trading by investment banks in all markets, and prohibiting investment banks from holding energy assets – to more funding and regulatory mandates for the Commodity Futures Trading Commission. Financial speculators – that is, hedge funds, investment banks, and other traders who do not take physical possession of the commodities – are surging into commodities markets. On that point, there is no dispute.

But experts differ widely on the impact these new players have on prices. Treasury Secretary Henry Paulson and many financial industry analysts say prices are still set by the fundamentals of supply and demand. Many lawmakers, along with oil industry spokesmen, the Saudi oil minister, and the International Monetary Fund, say excessive speculation in the futures market is also a factor in the run-up of prices.

Since September 2003, traders holding crude-oil futures contracts jumped from 714 contracts traded to more than 3 million contracts traded in May 2008, says Rep. Bart Stupak (D) of Michigan, who chairs the House Energy and Commerce Subcommittee on Oversight and Investigation. His panel held its second hearing on energy speculation Monday. Speculators now account for 71 percent of the oil futures market, up from 29 percent in 2000, he says, citing data from the Commodity Futures Trading Commission (CFTC). Overall, commodity index speculation has jumped from $13 billion in 2003 to some $260 billion today.

https://www.csmonitor.com/Business/2008/0624/p01s04-usec.html

[George II]

5. I wonder how soon republicans will be whining about this.

[durablend]

8. Soon as you check the clock, no doubt

[Bengus81]

16. Of course,last thing Trump Humpers want to see is lower gas prices

They want to pay as much as possible for fuel on the way to the hospital to die of Covid.

[durablend]

9. May not do a bit of good

January WTI crude oil (CLF22) on Monday closed up +0.81 (+1.07%), and January RBOB gasoline (RBF22) closed up +4.64 (+2.15%).

WTI crude oil and RBOB gasoline prices on Monday rebounded from 1-1/2 month lows and closed moderately higher. Crude prices on Monday shook off early losses and moved higher after OPEC+ said that it would weigh adjusting its crude production levels if the world's largest crude-consuming countries go ahead with plans to release crude supplies from their petroleum reserves. Crude prices initially opened lower Monday after the dollar index jumped to a 16-month high and after German Chancellor Merkel called for tighter restrictions to stem the surge in new Covid infections in Germany, Europe’s largest economy.

Crude prices rallied Monday after OPEC+ delegates said they might re-evaluate plans to keep boosting their crude production levels if the world's largest crude consuming countries (the U.S., China, Japan, and India) go ahead with their plans for a coordinated release of crude supplies from their respective reserves. OPEC+ will meet on Dec 2 to contemplate an increase of 400,00 bpd in January.

https://www.barchart.com/story/news/3698163/crude-closes-higher-as-opec-may-cut-output-if-countries-tap-reserves

[BumRushDaShow]

12. Have been watching the futures

https://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic

But also keep in mind that it seems it got down even that low after this - https://www.democraticunderground.com/10142827811 (where before that announcement, it had been over $80/bbl).

So I think there is a multi-pronged approach going on because certainly the other factor here other than "raw supply" is the same thing that is hanging up other parts of the economy - the supply chain/distribution issue - where there is dearth of truckers licensed to even haul oil (and new ones are still in training once the trucker schools started up again) and probably a backup of tankers at some ports. For example the backup in NY back in late September -

Dozens of cargo ships stuck waiting off New York's coast amid surging demand for goods, a report says

Zahra Tayeb
Sep 26, 2021, 5:42 AM


Around 24 cargo ships and oil tankers appeared to be stuck waiting to dock off the coast of Long Island, New York, The Daily Mail reported. MarineTraffic, the global ship-tracking site, showed ships gathered a few miles off the coastline that stretches from Long Beach in the West to Lido Beach and Jones Beach Island in the East, The Daily Mail reported.

The ships appeared to have been there since at least Saturday evening, the outlet added. Pandemic-induced shopping sprees ahead of the holiday season, coupled with a national labor shortage, are thought to be the main cause of the increased number of container ships at key US ports. Insider previously reported that 56 container ships were stuck at anchor or in drift areas off of Los Angeles and Long Beach ports.

Those ports were dealing with 140 ships, including 87 freighters, according to Insider's report.According to Container News, the Port of New York and New Jersey serves the world's major ocean carriers and global alliances. It consists of a complex of approximately 386 km of shipping channels, as well as anchorages and facilities.

With record numbers of huge cargo ships clogging key ports, causing a knock-on effect on the global supply chain, many retailers are being forced to find creative ways to overcome shortages and price hikes, Insider previously reported.

https://www.businessinsider.com/cargo-ships-stuck-coast-new-york-shipping-delays-labor-shortage-2021-9

And I heard this on the radio either last night or this morning (although am not seeing M$M reporting it yet) -

Navy and Port of Hueneme Help Relieve U.S. Supply-Chain Congestion

22 November 2021
From Ens. Drew Verbis, Naval Base Ventura County


PORT HUENEME, Calif. – The U.S. Navy in partnership with the Oxnard Harbor District (OHD) is providing resources onboard Port Hueneme in direct support of decreasing port congestion in Los Angeles County and reducing the national supply-chain shortage, Nov. 22, 2021.

A standing Joint Use Agreement (JUA) with Naval Base Ventura County and OHD, allows the Navy to support commercial supply chain logistics when activated.

“Naval Base Ventura County recently welcomed a large cargo vessel,” said Daniel J. Herrera, assistant program director for port operations, NBVC. “Ports of America already off-loaded a large number of forty-foot containers into lot 22 onboard Port Hueneme which is merchandise expected to have direct impact with helping to support holiday supply demands.”

The Department of the Navy entered into a JUA in 2002 with the OHD, (replacing the 1994 Memorandum of Understanding) authorizing commercial use of Wharf 3 onboard NBVC, including approximately 21 acres of contiguous land, buildings 546 and 548, and if available, up to an additional 10 acres of industrial land located outside of the Wharf 3 area. Jason Hodge, President of the OHD which owns the Port of Hueneme (POH), stated that commercial business at the port has increased significantly over the past year and when it comes to moving cargo, the Port’s flexible “Can Do” attitude is similar to the Navy Seabees’ “Can Do” motto of completing a task no matter the condition or situation.

“The Port appreciates the partnership with NBVC and locating additional space to accommodate excess holiday shipments coming through the Port,” Hodge said. “We are delighted to come together to meet the challenge of providing a solution to help keep essential goods moving. Our long-standing history of partnership continues with this call-to-action to address the national supply chain challenge.”

https://www.navy.mil/Press-Office/News-Stories/Article/2851427/navy-and-port-of-hueneme-help-relieve-us-supply-chain-congestion/

Some of the local California TV webpages are reporting it, for example this - https://www.wsaz.com/2021/11/23/navy-assists-with-supply-chain-backlog-california/ and they are using "CNN Newsource" for the story credit, yet there is NOT A PEEP on CNN's webpage about it.

[myohmy2]

10. good...

...even though the oil thieves will find some reason to slow production and refining to keep prices up...

...it probably won't reduce inflation much but it shows Dem concern and action...

...it just looks good...

[Bengus81]

14. Yeah...about time for another refinery "fire" isn't it?

[Calista241]

11. This is more a feel good measure, and maybe, possibly some temporary price relief.

50m barrels is a drop in the bucket when it comes to the world oil market. In 2020, the US used 19m barrels a day, so this 50m barrels will provide for 2 days worth of usage.

Price pressures will alleviate for a few days, and we'll likely get a headline on energy prices coming down, but this isn't a solution to lower oil prices.

[melm00se]

13. What Calista241 said

Last edited Tue Nov 23, 2021, 02:12 PM - Edit history (1)

1 barrel of oil (42 gallons) refines to 19 gallons of gasoline.

that works out to 950 million gallons of gasoline.

The US, in 2020, used 338 million gallons per day.

How much of an impact would that have?

[Rebl2]

15. This is

just a short term solution. Gas prices where I live have come down in the last week. Not sure why.

[BumRushDaShow]

17. This announcement last week may have been partly why

https://www.democraticunderground.com/10142827811

I expect this is all part of a multi-pronged approach for knocking some of the price increases off the top.

[Rebl2]

18. Actually I misspoke

It was two weeks ago gas prices in my area started falling.

[BumRushDaShow]

19. Some of the hikes

have been due to distribution problems (so a lack of supply). Once an area gets their shipments, then you start seeing some prices going down, although retail outlets are often slow to drop the prices.

You also have this (type of crude supply being shipped here) - https://www.eia.gov/petroleum/weekly/ (next report due tomorrow)

[marie999]

20. Sam's Club Jacksonville NC as of yesterday prices dropped from $3.22 to $2.94 in 2 weeks.

With a Plus card price is $2.79.