NEW ORLEANS (WVUE) – President Joe Biden is tapping the nation’s emergency oil supply again in hopes of keeping gasoline prices from skyrocketing and drivers and energy experts reacted quickly to the announcement.
Kevin Derbigny pumped gas into his truck well aware of Biden’s move.
“Hopefully it helps with going back up because at one point it was really breaking the bank to fill up all the way, especially when your truck holds 24, 25 gallons,” said Derbigny.
Biden announced on Wednesday (Oct. 15) that he was ordering the release of 15 million barrels of oil from the reserve which is located in Texas and Louisiana.
But is that enough compared to consumer demand?
Professor Pierre Conner is the executive director of Tulane University’s Energy Institute.
“In the grand scheme of things, I don’t think that’s a lot. The total production and consumption in the world is about a hundred million barrels a day. So, in terms of total percentages obviously, it’s pretty small,” said Conner.
Oil companies will have to buy the oil released from the SPR.
“I think that selective refineries might have a need for a particular type of crude that would be available or less expensive than what it would take to transport it,” said Conner. “But really the bigger issue around gasoline prices is the refinery complex in this country is running at a high level of utilization, so even if we had more crude available turning it into gasoline would be the bigger constraint. We’re running over 90% effective utilization, so there’s not a lot of room left, in order to produce more gasoline.”
The two Louisiana locations that are part of the Strategic Petroleum Reserve are Bayou Choctaw in Iberville Parish and West Hackberry in Cameron Parish, according to the U.S. Energy Department.
Biden is not ruling out releasing additional oil.
“We’re calling it a ready-and-release plan. This allows us to move quickly to prevent oil price spikes and respond to international events,” said Biden.
Conner also commented on the refining environment.
“We haven’t added to the refining capacity in the United States for 30 years and you know gasoline is one of the products of the refining process,” he said.
The release of oil from the emergency stock follows OPEC and its allies agreeing to reduce oil production by 2 million barrels a day.
But some energy experts are not convinced that the amount is etched in stone.
“I think a very important factor to consider is that the amount of production in a target isn’t necessarily the amount that’s actually, you know, put into the market, so you have to watch it closely to see if OPEC is true to their word on what they take off the market,” says Conner.
The reserve’s authorized storage capacity is 714 million barrels but before Biden’s announcement, the amount of oil in government storage was well below that.
“We’ve drawn down the SPR now to around that 400-million-barrel range which is really the lowest level that it’s been since 1984 since the initial authorization,” Conner stated. Still, he says it takes about 13 days for the oil released from the Strategic Petroleum Reserve to enter the market.
“Physically moving the crude oil around may take a little bit of time but there have been exchanges and releases that have occurred because of hurricane disruptions or times of other disruptions and they can be fairly efficient, so systems are in place,” says Conner.
And he stressed that oil prices are not set by energy companies, rather he says the market sets the prices.
As for Derbigny, filling up his tank cost close to $80. Not long ago he was paying even more.
“A hundred, a hundred or more,” said Derbigny.
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