President Joe Biden said Tuesday that the administration will use the Strategic Petroleum Reserve as part of a global effort to calm the rise in fuel prices.
The coordinated release between the United States, India, China, Japan, Republic of Korea, and the United Kingdom is the first of its kind.
The US will release 50 million barrels from the SPR. Over the next several months, 32 million barrels will be exchanged, while 18 million barrels will be accelerated.
The White House said that the President is prepared to use his full authorities to maintain adequate supply as we exit the Pandemic.
The administration said for months that it was looking into the tools at its disposable as West Texas Intermediate crude futures surged to a seven-year high above $85.
The prices at the pump are at their highest level in seven years. The national average for a gallon of gas was $3.409 on Monday, up from $2.11 a year ago. The price of crude makes up between 50% and 60% of what consumers pay to fill up their tanks.
John Kilduff is a partner at Again Capital. If we get confirmation of meaningful supply from several of the major Asian consuming nations, this added supply should help to bridge the production shortfall ahead of winter.
The Department of Energy says the SPR has 604.5 million barrels spread across four sites. It takes 13 days after a presidential announcement for the oil to hit the market.
The SPR was founded in 1975 and can hold 727 million barrels.
The DofE says that the SPR can be tapped in three ways, including a full drawdown, a limited drawdown, or a test sale.
After the announcement, oil fell 28 cents to $76.50 per barrel. International benchmark crude stood at $79.98 per barrel, up 34 cents.
