WASHINGTON — As the U.S. braces for a busy holiday travel period, the Biden administration’s decision Tuesday to sell 50 million barrels from the Strategic Petroleum Reserve should lower gasoline prices in the short term, analysts said.
In an effort coordinated with other nations, the U.S. will make up to 32 million barrels of crude oil available and will sell an additional 18 million barrels of oil, as Congress mandated in budget legislation in 2018, the Energy Department said.
Energy Secretary Jennifer M. Granholm said the administration is trying to lower costs for the public and boost the nation’s economic recovery from the COVID-19 pandemic. “As we come out of an unprecedented global economic shutdown, oil supply has not kept up with demand, forcing working families and businesses to pay the price,” Granholm said.
The announcement comes after congressional Democrats urged Biden to direct a sale from the national crude oil stockpile to ease driving and heating costs during the holiday period, although market experts said the effect would be minimal.
DOE said it is coordinating its sale with “other major energy-consuming nations including China, India, Japan, South Korea and the United Kingdom,” in an effort to increase global supply.
Stephen Nalley, the acting administrator of the U.S. Energy Information Administration, told senators at a hearing last week that the agency expects heating bills in the U.S. to increase between 6 and 46% this winter from last winter, though that range depends on the fuel used for heating.
Craig Erlam, senior market analyst at foreign exchange broker Oanda, said the fact that the release is being done in conjunction with other countries gives it more impact, at least in the message it sends, and the move could take some of the heat out of the market. That could help avert a significant rise in oil prices in the near future.
“But based on how the market’s reacted, it doesn’t seem like people are buying too much into it,” Erlam said. “We’re still talking relatively low numbers over a long period of time.”
He noted the politics at play, with the Biden administration not wanting to be seen as sitting on its hands while prices go up ahead of next year’s midterm elections.
But the practical effect is likely to be limited.