Biden Does More of the Same to Fight ‘Putin’s Price Hike’ at the Pump

It has been quipped that the definition of insanity is doing the same things over again and expecting different results. President Joe Biden recently conceded that he could not do much about gasoline prices, revealing that he perhaps exhausted all his options. By now, the administration is throwing darts at the board and hoping that the peak of the storm has already passed. This thought process was on display when the White House announced that it would be, once again, tapping into the nation's reserves to put an end to "Putin's price hike," which is an all-encompassing phrase that can be applied to every problem in the Democrats' path.

The United States will release one million barrels of oil per day from its Strategic Petroleum Reserve (SPR), the White House confirmed on March 31. The federal government will tap the country's reserves for the next six months as the nation waits for domestic oil and gas producers to increase output. This is the third time that Biden has touched the SPR since November, previously releasing 50 million and 30 million barrels.

Try and Try Again

“The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time,” the White House said in a statement. “This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up.”

In total, this will represent about 5% of national consumption. The US consumes roughly 17 million barrels a day, leading some market analysts to call the move a short-term remedy rather than a long-term solution. However, President Biden purported that this can alleviate pain at the pump until the war in Eastern Europe subsides and companies can amplify enough production to satisfy demand.

Energy Secretary Jennifer Granholm tweeted after the official announcement that her department is prepared to unleash one million barrels a day immediately.

Crude oil futures responded to the news with a sharp selloff. The May West Texas Intermediate (WTI) contract crashed to $100 per barrel on the New York Mercantile Exchange, and Brent slumped below $108 a barrel on London's ICE Futures exchange. Energy commodities edged higher in overnight trading.

The administration took the opportunity to slam the energy sector, accusing businesses of "sitting on" 12 million acres of federal land and 9,000 unused permits. Biden recommended lawmakers slap fees on firms that are not using wells from their leases on federal lands. The president confirmed that companies producing from these leased acres and existing wells will not be penalized, but warned that firms not utilizing these lands could “pay a fee for each idled well and unused acre.”

In recent weeks, the fossil fuel sector has pushed back against many of these claims from the Oval Office, including Kathleen Sgamma, president of Western Energy Alliance, who recently wrote:

"After the Biden Administration spent over a year making it more difficult to develop on federal lands while begging Russia to increase its production, the admission—no matter how long it took to make—that American production is preferable to Russian is now welcome.

"We also appreciate that suddenly environmental groups are very keen for us to develop on existing leases and permits, as they constantly sue to stop any development.”

President Biden used his prepared remarks on Thursday to promote his green energy agenda, revealing that he plans to invoke the Defense Production Act. This move would lend a hand to the production and processing of minerals for large-capacity batteries, such as cobalt, lithium, and nickel. Despite these components being championed as solutions to saving the environment, critics assert that extracting lithium, for example, increases carbon dioxide, contaminates the air, hurts the soil, cuts down trees, and harms all life forms in the area. Human rights abuses have also been cited in the mining process.

A Short-Term Fix?

The consensus among market analysts is that this is a short-term remedy that fails to address long-term problems. In a note after the president's announcement, Goldman Sachs said that these efforts do not address structural deficits that are "now years in the making." In fact, experts pontificate that the largest withdrawal in the SPR's 45-year history is going to exacerbate the problems. The US government will need to restock inventories soon, companies are going to be discouraged to produce, OPEC+ will be further dissuaded to expand output, and the latest Energy Information Administration (EIA) highlights a notable drawdown in domestic stockpiles.

Phil Flynn, author of The Energy Report, wrote in his latest post:

"Desperate times call for desperate measures. The Biden administration is desperate as their poll numbers fall while oil prices soar. So what should they do to appease angry voters? Well, it appears everything and all except to admit that his green energy policies of cracking down on investment in fossil fuels is a major part of the problem. The other part of the problem is the Biden administration’s failed diplomacy with OPEC and mainly Saudi Arabia, the country that Biden wanted to make a pariah state."

After the White House news conference, Goldman Sachs actually raised its Brent forecast for 2023 to $115 per barrel. ING's base case for Brent, the international benchmark for oil prices, is $105. This is bad news for a post-pandemic economy that is witnessing across-the-board price inflation. Should crude remain above $100, economists note that this will add between 0.5 and 1.3 percentage points to the overall consumer price index (CPI).

Perhaps if Biden only ordered a two-week ban on transportation, he could stop this wave of sky-high energy prices: “Two weeks to stop the pain at the pump.”