In an effort to contain soaring oil prices, the Biden administration on Tuesday announced a loan of $13.4 million barrels of crude oil from the Strategic Petroleum Reserve to seven major U.S. energy companies.
These companies include ExxonMobil Oil Corp, Shell, BP Products North America Inc, Trafigura Trading LLC, Phillips 66 Co., Macquarie Commodities Trading SA and Chevron Corp.
The price is part of an unprecedented plan announced in November by President Joe Biden to release 50 million barrels from the reserve in coordinated action with India, Japan, South Korea and China. China to cut prices and loosen OPEC’s stranglehold on supply.
During a hearing on Capitol Hill last week, US Congressman Kelly Armstrong said the Biden administration’s drawdowns from the strategic reserve are either a political ploy or proof that the administration has a complete lack of knowledge of global energy markets.
“Even though it would lower the price of oil, that oil they release won’t magically turn into gasoline tomorrow. The correlation between gasoline prices and the price of oil obviously exists, but one of the problems with gasoline is the bottleneck and the refining process, and the futures contracts, and all these different issues. So not only is it a bad idea because it’s not going to work, but there’s another bad reason for that is because it means you’re going to have to fill strategic oil reserves at high prices at cost to the taxpayer,” Armstrong said.
Armstrong says the Biden administration imposed major restrictions on domestic oil production and even imported 200,000 barrels of oil from Russia in October.