Joe Biden announced an historic release of federal oil. Will it lower California gas prices?
No, gasoline prices won’t suddenly tumble like crazy because President Joe Biden Thursday announced the biggest release of oil reserves in history. But his action could nudge prices somewhat lower.
The impact of releasing 1 million barrels of oil a day for six months should be “marginal at best,” said Sanjay Varshney, professor of finance at California State University,Sacramento..
Patrick De Haan, head of petroleum analysis at GasBuddy, said he could see the Biden action cutting prices as much as 10 to 25 cents a gallon, but called that a shaky prediction.
The average California price of a gallon of gasoline Thursday was down slightly to $5.89, still the highest in the nation and well above the $4.82 average of a month ago and $3.90 of a year ago.
In the Sacramento area, the average price Thursday was $5.74 a gallon, down slightly from Wednesday but above the $4.78 of a month ago.
California’s prices are higher for some unique reasons. Among them: The highest state and local gasoline taxes in the country, environmental laws and the difficulty of getting the product from the east to the West Coast.
The oil Biden plans to tap is in the Strategic Petroleum Reserve. It was created in 1975 after prices jumped and supplies shrunk during the 1972-74 Arab oil embargo.
The oil is stored in underground salt caverns in Texas and Louisiana. This is the third time in recent months Biden has had oil taken from the reserve.
California and gas
Getting the oil to California is difficult, Varshney said. Because of the geographic hurdles, the federal Energy Information Administration says the state’s refineries need to run at or near full capacity to meet the state’s gasoline demand.
“Even when supplies are available from other West Coast refineries, U.S. Gulf Coast refineries, or from foreign refineries, they can take a relatively long time to arrive in California,” the department said.
De Haan saw several risks to the price forecast. One is the unknown. Biden, he said, is reacting to the current price situation. But what if the Russia-Ukraine conflict escalates? What if other world powers act in ways that threaten the oil supply?
He also was concerned about the longer-term implications of releasing oil from the reserve.
The reserve is down to 568 million barrels, and is now about to go down further. “What if something else comes up?” he asked. The record reserve was 726.6 million barrels in December 2009.
Others, notably Republicans, have criticized Biden for not taking longer-range steps to increase domestic production.
“By announcing an additional release from the SPR, President Biden is acknowledging that increasing supplies of oil reduces the price of gas.” said Rep. Ken Calvert, R-Riverside. “However, at the same time, Biden continues to back policies that are making it more difficult and more expensive to increase supplies of American made energy.”
”We have the ability to be energy self-sufficient. Why won’t the Biden Administration let America produce what we need domestically?” asked Rep. Doug LaMalfa, R-Oroville.
Biden took steps Thursday he said would help spur production.
“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,” said a White house statement. It urged oil producers step up production.
“The fact is that there is nothing standing in the way of domestic oil production,” the statement said.
For the moment, though, the Biden action on the reserve could be of some limited help.
Severin Borenstein, faculty director of the Energy Institute at the Haas Business School at the University of California Berkeley, put it this way:
The Biden release “doesn’t offset the run up over the last couple of months by any means,” he said, “but it is noticeable to people in most parts of the country – less so in California.”
This story was originally published April 1, 2022 at 5:00 AM.
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