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In a live speech at the White House on Wednesday, U.S. President Joe Biden unveiled what he called three “critical” steps to ensure American energy security as Russia’s war with Ukraine rages on and OPEC+ prepares to cut production in November.
Biden said the first critical step would see the Department of Energy (DoE) release another 15 million barrels from the Strategic Petroleum Reserve (SPR), extending the release through the month of December in order to help bring oil prices down further and give American families more “breathing room” at the pumps.
Biden noted that the SPR is now more than half full, and that independent analysts have shown that these releases have played a significant role in lowering oil prices, but that gasoline prices have not come down proportionately.
While the price of gasoline in the United States has fallen 30% from summer highs and has continued to drop every day in the past week, “they aren’t falling fast enough,” Biden said, and “families are hurting”.
The second critical step announced by Biden is to convince American oil producers to responsibly increase production.
“We have not stopped or slowed oil production,” the U.S. president said. “We are on track for record oil production in 2023. The U.S. is the largest producer of petroleum products in the world.”
Nonetheless, Biden said he recognized that American oil companies are concerned that investing in additional oil production today might leave them stuck with uncompetitive assets later.
To alleviate these concerns, the U.S. President pledged to buy back oil to refill the SPR at a price of $70 per barrel in the future. Biden described the plans as one that will be profitable for both taxpayers and American oil companies in the years ahead, referring to $70 oil as “a good price for companies, and a good price for taxpayers” and “critical to our national security”.
Selling oil from the SPR at around $90 per barrel–the average price since March–and then refilling it for around $70 per barrel will make money for taxpayers, lower the price of gasoline and help bolster production, while also accelerating our transition to clean energy.
Finally, the third step in Biden’s plan is to pass savings onto consumers. The U.S. president again bemoaned the tens of billions in profits for American oil companies in a single quarter, accusing them of using that windfall to buy back their own stock and pass money to shareholders instead of consumers.
“When the cost of oil comes down we should see prices at the pump come down too. Oil has fallen $4 a barrel in the past two weeks—$40 a barrel since mid-lune. But gas prices haven’t fallen that much. If retailers and refiners were earning the average profit they made over the last seven years, Americans would be paying at least 60 cents less per gallon at the pump,” the president said.
Biden called on American oil companies to refrain from using profits for buybacks while a war is raging, and to invest in America for Americans instead, promising them they would still make significant profit and shareholders would still do “pretty well”.
For those concerned about the administration’s commitment to a transition to clean energy, Biden gave assurances that has not been delayed or deferred. He called on Congress to pass permanent reforms to accelerate the development of clean energy, saying the process of getting projects approved is “too cumbersome and time-consuming”.
Biden stated that independent analysis shows that the $369 billion in federal investment in clean energy will generate $1.7 trillion in total public and private investment in the years ahead.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com