MICHIGAN, USA — Plans announced this week by the Biden Administration to release approximately 180 million barrels of oil from US reserves come with the hope of driving down still soaring fuel prices ahead of the busy summer season.
But how likely is it that the move could ease the global energy crunch?
The 13 ON YOUR SIDE Verify Team consulted the experts.
THE QUESTION:
President Joe Biden called this week’s decision the largest ever release from the US Strategic Petroleum Reserve, but the internet’s already abuzz with questions over whether the added supply would be enough to drive down costs and when drivers could expect to see that difference.
THE RESULT:
Yes, the additional supply could push fuel prices lower, but experts warned external pressures including the war in Ukraine, decisions by OPEC and domestic production bottlenecks could also weigh on any potential downward movement.
SOURCES:
- The US Energy Information Administration
- The US Department of Energy
- Dr. Matthew Ross—assistant professor of finance, Western Michigan University
- Patrick De Haan—head petroleum analyst, GasBuddy
WHAT WE FOUND:
“I thought the first release was kind of a disappointment.”
De Haan referenced a recent case study: November’s release of 50 million barrels from the national stockpile.
“Because it came at a time that Russia had basically just started the war in Ukraine, I was surprised it wasn't bigger,” he suggested.
The US EIA maintains weekly average price records dating back to at least 1990.
Observing the chart’s movements from early December 2021—when the White House suggested that release would likely hit the market—prices fell $.12 from late November’s national average of $3.39 to an average of $3.27 recorded a month later.
Experts estimate the US consumes approximately 20 million barrels a day, meaning the amount then tapped equated to less than half of a week’s supply, a drop in the proverbial barrel.
The withdrawal announced this week, however, would amount to 1/4 to 1/3 of the entire US stockpile, which at the time of publication held approximately 600 million barrels, per US Department of Energy estimates.
The release amounts to substantially more oil than in previous withdrawals, which, experts suggest, may translate to substantially greater relief.
“It certainly could be a big move,” Ross predicted. “That's a large supply of oil coming in, that's going to do a lot to sort of make up the imbalance.”
As far as the timing of that relief…
“We're seeing price response from it right away, just on news of that announcement,” Ross said.
“There will likely be a net positive for motorists filling up that could push prices down by as much as $.10, maybe even as much as $.35 a gallon,” De Haan said, noting the average price in West Michigan had already fallen moderately over the course of the last week.
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