President Joe Biden tapped the US strategic oil reserves in a bid to reassure Americans angry about inflation and goods shortages as they head off to Thanksgiving – and to buoy up his sinking poll ratings.
Facing growing discontent around the country over inflation and especially the soaring price of fuel in filling stations, Biden on Tuesday announced a coordinated plan with other big consumers to release national oil reserves onto the market.
The White House said that following weeks of negotiations, “this release will be taken in parallel with other major energy consuming nations including China, India, Japan, Republic of Korea and the UK.”
“It will take time but before long you should see the price of gas drop,” Biden said in a speech at the White House.
Beijing and Tokyo confirmed Wednesday that they would join the US but gave few details.
Despite the announcement, both main crude contracts surged soon after the news – WTI more than 2% and Brent more than 3% – with analysts saying the release had been well telegraphed but the amount was less than expected. And they extended the gains in Asian trade.
While the US economy is rebounding strongly from the Covid-19 lockdowns, supply chain disruption and inflation is stirring anxiety as the holiday season begins with Thanksgiving on Thursday.
“Moms and dads are worried asking will there be enough food we can afford to buy for the holidays? Will we be able to get Christmas presents to the kids on time?” Biden said, acknowledging that for many the price rises are “painful.”
However, he pushed back at critics who accused him of failing to grasp the challenge. Biden noted that the two biggest trading ports, both in southern California, were now working 24/7, as opposed to just 40 hours a week.
In the latest average of polls from fivethirtyeight.com, Biden’s approval rating is just 42.8, with 52.2% disapproving.
Biden said the price of gasoline in the wholesale market has fallen by about 10% in the last few years but the price at the pump hasn’t budged.
“In other words, gas supply companies are paying less and making a lot more,” he said, accusing companies of “pocketing the difference” between wholesale and retail prices.
Republican opponents were not impressed with Biden’s reassurances on tapping the oil reserve.
“Joe Biden’s failed leadership caused skyrocketing prices, and now American families are paying more for gas, groceries, and everything this Thanksgiving,” Republican National Committee chair Ronna McDaniel said in a statement.
Expensive holiday trips
US employment is rapidly rising, wages are up and the stock market is climbing ever higher, but inflation, especially for fuel, is spoiling the mood.
Average fuel prices at filling stations are US$3.41 a gallon, the highest level since 2014, according to latest figures from the AAA motorists’ association. This represents an increase of US$1.29 over gasoline prices a year ago.
Like millions of Americans, Biden and his wife Jill are traveling to see family or friends ahead of Thanksgiving, although in his case it was to be on Air Force One later Tuesday for a short flight to the picturesque island of Nantucket.
High transport costs are also juicing costs and scarcity throughout the economy, with supply issues impacting everything from second hand cars to clothing.
Biden said the rough patch was temporary and that visions of empty shelves at Christmas would not come to pass.
“Families can rest easy. Grocery stores are well stocked with turkey and everything, you know, (that) you need for Thanksgiving,” Biden said.
Energy companies under scrutiny
The US strategic reserves, held in underground depots in Texas and Louisiana, are the largest emergency supply of oil in the world.
A senior administration official said the releases would start in mid- to late December, and that further intervention was possible to steady the market, “responding to a once-in-a-century pandemic.”
“The president stands ready to take additional action if needed and is prepared to use his full authorities, working in coordination with the rest of the world, to maintain adequate supply as we exit the pandemic.”
Against a backdrop of rising output, oil prices have already dipped nearly 10% in the last few weeks. But officials echoed Biden’s repeatedly stated concerns that despite easing crude values, prices of gasoline for drivers have only gone up.
A senior official speaking on condition of anonymity said the government was looking into “anti-competitive practices” and will “examine whether illegal conduct is costing families at the pump.”