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Biden tapping US oil reserves for six months to control petrol prices

President Joe Biden (Patrick Semansky/AP)
President Joe Biden (Patrick Semansky/AP)

President Joe Biden is ordering the release of one million barrels of oil per day from the nation’s strategic petroleum reserve for six months, the White House said.

The move is a bid to control energy prices that have spiked after the United States and allies imposed steep sanctions on Russia over its invasion of Ukraine.

The White House said Mr Biden wants Congress to impose financial penalties on oil and gas companies that lease public lands but are not producing.

California Gas Prices
Petrol prices have been rising in the US (Jeff Chiu/AP)

He also intends to invoke the Defence Production Act to encourage the mining of critical minerals for batteries in electric vehicles, part of a broader push to shift toward cleaner energy sources and reduce the use of fossil fuels.

The actions show that oil remains a vulnerability for the US. Higher prices have hurt Mr Biden’s approval domestically and added billions of oil-export dollars to the Russian government as it wages war on Ukraine.

Tapping the stockpile would create pressures that could reduce oil prices, though Mr Biden has twice ordered releases from the reserves without causing a meaningful shift in oil markets.

Part of Mr Biden’s concern is that high prices have not so far coaxed a meaningful jump in oil production. The planned release is a way to increase supplies as a bridge until oil companies ramp up their own production, with administration officials estimating that domestic production will grow by one million barrels daily this year and an additional 700,000 barrels daily in 2023.

The markets reacted quickly with crude oil prices dropping about 4% in Thursday trading to under 104 dollars a barrel. Still, oil is up from roughly 60 dollars a year ago, with supplies failing to keep up with demand as the world economy has begun to rebound from the coronavirus pandemic.

That inflationary problem was compounded by Russian President Vladimir Putin’s invasion of Ukraine, which created new uncertainties about oil and natural gas supplies and led to retaliatory sanctions from the US and its allies.

Mr Biden has been in talks with allies and partners to join in additional releases of oil, such that the world market will get more than the 180 million barrels total being pledged by the US.