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U.S. to release 50 million barrels of crude oil from the reserve to lower gas prices

AILSA CHANG, HOST:

Today, President Biden said the U.S. will release 50 million barrels of crude oil from the nation's Petroleum Reserve. It's a response to rising gasoline prices, which have added to the inflation that Americans are experiencing.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT JOE BIDEN: Today we're launching a major effort to moderate the price of oil; an effort that will span the globe in its reach and ultimately reach your corner gas station, God willing.

CHANG: This is part of a coordinated effort involving other countries too. And joining us now with more details is NPR's Jeff Brady.

Hey, Jeff.

JEFF BRADY, BYLINE: Hello.

CHANG: So first, can we just step back for a moment. Can you just remind us - why have gas prices increased so much over the last year?

BRADY: A big factor is the coronavirus pandemic. You know, a lot of us stopped traveling. And now that people are getting vaccinated and comfortable being out again, gas demand is up, but supply just hasn't kept pace. A year ago, the national average price for regular gas was $2.10 a gallon. And now, it's $3.40; more than 50% higher. Democrats are worried going into the midterm elections next year, so the administration wants to be seen as responding to an issue that's...

CHANG: Yeah.

BRADY: ...Costing a lot of Americans money.

CHANG: So can you explain - what exactly is the White House doing here?

BRADY: It's working with several other countries to coordinate releases from their reserves, including China, Japan and the United Kingdom. Here in the U.S., 50 million barrels of crude oil will be released from the Strategic Petroleum Reserve, which was created after the oil shortages in the 1970s. But it wasn't really created for situations like this. It's meant more for when, like, another country cuts off oil for political reasons rather than price increases.

Still, most of this oil, it's going to be released under an exchange program. That means it'll go out on the market, and then oil companies will replace it later. The Energy Department also will sell 18 million barrels that Congress already approved. The administration is moving that sale date up to try and get prices down now.

CHANG: So interesting. So what do you think? Do you think this will actually work to reduce gas prices?

BRADY: It should help a little. But, boy, today, both oil and gas futures prices were up. You know, a lot of traders - they expected an even bigger release from the reserve. But in recent weeks, just, you know, the rumor of an announcement like this was that it was coming. That sent some crude prices down before today.

At the pump, though, gasoline prices just have not moved much at all. It can take a while for all that oil to move through the system. But there's another problem here with refineries. Tom Kloza - he's at the Oil Price Information Service and says the country has lost some of its refining capacity this year.

TOM KLOZA: And that's not the fault of any president. It's not the fault of Congress. The refineries that we've lost on the West Coast and at the Gulf Coast - most recently losing a refinery because of Hurricane Ida.

BRADY: And Kloza says refining capacity - it should increase late next year. He predicts the White House announcement will drop prices a little because oil prices are the biggest factor in gas prices. The administration says that's the plan here; to use this oil from reserves as kind of a bridge until prices come down in the future.

CHANG: Right. Well, if there are potential problems with this approach, is there anything else the administration can do to bring gas prices down sooner?

BRADY: Last week, the president did ask the Federal Trade Commission to look for illegal behavior that might be keeping gas prices artificially high. There's no evidence this is happening now. And past investigations like it just haven't found wrongdoing.

Biden also asked OPEC members, like Saudi Arabia and other oil-producing countries, to boost production, but those countries have said they intend to keep prices higher. This latest action could increase tensions with these countries. They had planned to boost production next month, but with today's announcement, they could choose to reduce production to keep prices where they want them.

CHANG: That is NPR's Jeff Brady.

Thank you so much, Jeff.

BRADY: Thank you.

(SOUNDBITE OF METRIC'S "THE FACE PART I") Transcript provided by NPR, Copyright NPR.