How tapping strategic oil reserve will affect U.S. gas prices, OPEC+

Correction: The transcript of this piece has been changed to reflect that President Gerald Ford signed a law creating an emergency stockpile of crude oil in 1975, not in 1973 as originally stated. We regret the error.

President Joe Biden is tapping an emergency stockpile of oil to stem a rising tide of energy prices. His order Tuesday draws 50 million barrels of crude oil from the nation's Strategic Petroleum Reserve. William Brangham begins the report, and Judy Woodruff speaks to Bob McNally of Rapidan Energy Group for how The Organization of the Petroleum Exporting Countries could react and more.

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  • Judy Woodruff:

    President Biden is tapping an emergency national stockpile of oil to try to stem a rising tide of energy prices. His order today draws 50 million barrels of crude oil from the nation's Strategic Petroleum Reserve.

    William Brangham begins our coverage.

  • William Brangham:

    With rising energy prices, President Biden was under growing political pressure to make a move.

    Joe Biden, President of the United States: So, today, I'm announcing that — the largest-ever release from the U.S. Strategic Petroleum Reserve to help provide the supply we need as we recover from this pandemic.

  • William Brangham:

    Five other nations, including China, have agreed to make similar withdrawals from their own stockpiles.

  • Joe Biden:

    We're launching a major effort to moderate the price of oil, an effort that will span the globe in its reach and ultimately reach your corner gas station, God willing.

  • William Brangham:

    All of this comes after pandemic lockdowns had slashed the demand for oil last year, but when the U.S. economy revved back into gear, renewed demand outpaced supply.

    Nationwide, average gas prices have spiked to nearly $3.40 a gallon. That's up more than 50 percent from a year ago. Republicans have blamed the president for the climbing prices.

  • Sen. Roy Blunt (R-MO):

    Every time you go fill your car up with gas, you wonder if you're going to set your own personal high that day. Is this going to be more than I have ever paid for gas before in my life?

  • William Brangham:

    Democrats, like Senate Majority Leader Chuck Schumer, put the blame elsewhere, but they too pressed Mr. Biden to address the issue.

  • Sen. Chuck Schumer (D-NY):

    We're here today because we need immediate relief at the gas pump, and the place to look is the Strategic Petroleum Reserve.

  • William Brangham:

    President Biden is not the first to tap the Strategic Petroleum Reserve in an emergency. In fact, the Reserve was birthed from a crisis.

    In 1975, after the Middle Eastern members of OPEC cut off oil exports to the U.S., President Gerald Ford signed a law creating the emergency stockpile. The U.S.' reserves are located along the Gulf Coast in underground salt caverns at four major facilities in Louisiana and Texas. They hold more than 600 million barrels of petroleum.

    But Mr. Biden's move comes at a complicated moment, with his administration trying to strike a balance between boosting the economy, while also cutting oil and gas use because of its impact on climate change.

    Days before last month's U.N. climate summit, the president was asked if he's being inconsistent.

  • Joe Biden:

    On the surface, it seems like an irony, but the truth of the matter, is you have all known, everyone knows that the idea we're going to be able to move to renewable energy overnight and not have — and from this moment on not use oil or not use gas or not use hydrogen, is just not rational.

  • William Brangham:

    The question now is whether these temporary actions boosting oil and gas supplies will make enough difference for consumers to see.

    For the "PBS NewsHour," I'm William Brangham.

  • Judy Woodruff:

    The president's move today comes at one of the busiest times of the year for drivers, as many prepare to travel for Thanksgiving.

    Bob McNally is president of Rapidan Energy Group, an energy policy and consulting firm, and he's a former energy adviser to President George W. Bush.

    Mr. McNally, thank you very much for joining us.

    So, this is the first time the United States has done this, a president has done this in coordination with other countries. How much difference do you believe it will make?

  • Bob McNally, President, Rapidan Energy Group:

    It is.

    Judy, it's great to be with you.

    It is the first time he's done this in coordination with other countries without an emergency. We have had coordinated releases during the first Gulf War Katrina and after the Libya disruption. But what's unique about this is that it's a coordinated release of some producers, about six, without an actual supply interruption.

    As for the impact, I expect what most people expect and what the president himself has said, not much of an impact from this. It's going to wash away in a few weeks to a few months. It's, in a way, a drop in the ocean. The global oil market is enormous and shaken by huge trends in supply and demand.

    And this injection of oil is just one factor. And we think it'll maybe bring gasoline prices down a dime, maybe 15 cents. And, really, that is arrived from the last few weeks, because the price of oil has fallen.

  • Judy Woodruff:

    Right.

  • Bob McNally:

    The crude oil price has fallen over the last several weeks. And that is what drives the price of gasoline.

  • Judy Woodruff:

    And, at this point, there's some expectation that the oil-producing countries around the world, the OPEC countries, they may reduce their production in order to offset this.

    What's your expectation about that?

  • Bob McNally:

    Well, that is what they are considering right now. There's no question they're considering that. They signaled yesterday, if we did this, they might react.

    Now, that would be a very provocative event. Were they to meet next Thursday, and they do meet next Thursday, December 2, and decide to stop their increases, that would be quite provocative. I think there's a good chance of that. However, they may choose to lie low a little bit, especially, as we saw today, the crude oil price rallied. It went up on the decision by 3 percent.

    So, if oil prices continue going high, the smarter move for OPEC Plus might be to lay low for a while and gradually start to maybe reduce the increases starting next year. That's what I think they will do.

  • Judy Woodruff:

    So you're seeing a minimal effect on prices.

    What other options does the president have at a time like this?

  • Bob McNally:

    The only good option he has was plan A that President Biden tried. And that is to lobby OPEC Plus, really Saudi Arabia, to increase more oil, because the sad reality anybody in the White House who served knows — I know it, my friends who served know — is the only way to get a lot of oil quickly is to ask OPEC Plus to increase.

    But they have said no. So we're at second best. Other options we have heard talked about are — would be counterproductive. You hear a lot of discussion of banning crude oil exports. Six members of the House Democrats and 11 Senate Democrats have called for that.

    That would be an authentic policy error. It would actually, we think, cause gasoline prices to go up and do nothing but hurt shale oil production. But that is on the table. And it's been reported it's on the table. He can threaten to sue OPEC Plus countries under the Sherman Antitrust Act, and it was that act that was used to break up Standard Oil in 1911.

    I don't think that would be productive either. There are things he can do such as adjust the renewable fuels mandate, which is our ethanol mandate. There are some measures there he could do that might bring just a little bit of relief. But the real truth is, Judy, there is no short term solution to high gasoline prices, other than to get OPEC Plus to put a lot more oil on the market fast.

    And this, they won't do.

  • Judy Woodruff:

    Of course, a number of people are pointing out today this is a president who has said that fighting climate change, reducing carbon emissions is a priority for him. This is a move in the opposite direction.

  • Bob McNally:

    You know, that's right.

    And I'm sure you have heard too, in Washington, there's this myth that Democrats or environmentalists love high oil prices, because it gets folks to buy more fuel-efficient cars and electric vehicles. And it does. That's true. But I think what we're seeing today is, elected officials, anyway, they do not like high oil prices.

    And President Biden's taking every step he can to get prices down. And there is a disconnect. And the president has acknowledged that. There really is a question whether political leaders are willing to see their consumers face the types of cost increases that will be needed to decarbonize the energy sector down the road. Today suggests they may not be that willing to do so.

  • Judy Woodruff:

    So, bottom line, I'm going to come back to the question William Brangham asked at the end of his report. And that was, will there be enough of a difference here for consumers to see?

  • Bob McNally:

    I don't really think so.

    I think you will see squiggles and a nickel here, a dime there, in the coming weeks. Again, most of that is baked in the cake over the last several weeks with crude oil prices dropping. I think it's not quite enough, I'm afraid, no. I wish I had better news.

  • Judy Woodruff:

    Well, we all do.

    Bob McNally, the president of Rapidan Energy Group, thank you very much for joining us.

  • Bob McNally:

    Thank you.

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