President Joe Biden talks at the State Department in Washington, Feb. 4, 2021. “When your great nation is facing decline because of rising inequality, insecurity, distrust and alienation,” writes New York Times columnist David Brooks, ”you don’t just sit there. You try something big.” (Stefani Reynolds/The New York Times)
Economics

Oil Reservers to the Rescue

Glizzy
(I know it’s everywhere, sorry)

If the price of gas comes up in casual conversation one more time I might lose it. As many of us have seen, the price of oil is up significantly at the pump based on demand, supply issues, and Russia tensions as the overseas controversy continue. The average price at the pump sits at $4.22 a gallon according to AAA’s numbers. I’d give a kidney to pay $4.22 for a gallon of gas. The average price in California, according to Gas Buddy, is $5.90. The prices have been a bit outrageous, so much so that Governor Newsom had proposed $400 debit cards to combat the gas prices but that was shut down quickly (shocking). Biden has addressed the issue over the past month stating he understands the “pain at the pump” Americans are facing but what is he going to do about that? 

Today, Biden ordered a release of 1 million barrels of oil per day over the next six months to combat the spike in oil prices. This will be the largest release in its 50-year history. The prediction is that this release will be a relief until the end of the year when domestic production ramps up. The President’s goal is to use the profits made from the release of this reserve to purchase more later on when prices are lower, thus replenishing the reserves. He stated, “We’ll be ready for future emergencies.” 

The oil market reacted to this during today’s trading session with crude futures down 6.99% (nice) at the close. As usual, there is criticism against the release of oil with analysts stating this relief will be short-lived. Goldman Sachs stated, “yes this may help blunt the impact of rising prices in the near term but won’t impact the supply deficit they see coming for years…” (CNBC) The drop in price may increase demand as Americans are able to afford gas more often and thus puts us back into a loop, econ 101 am I right. However, the overseas tension may not be the only thing to blame here. “Oil producers have been more focused on meeting the needs of investors than consumers, according to a survey released last week by the Dallas Federal Reserve. About 59% of the executives surveyed said investor pressure to preserve “capital discipline” amid high prices was the reason they weren’t pumping more, while fewer than 10% blamed government regulation.” (CNBC) Companies continue to face criticism as they achieve record profits while many Americans take a hit. To wrap things up here it is likely the oil price spike of 2022 will continue to cause issues across the country because it will be difficult to get everyone on the same page. Moving forward we may, the keyword here, see a drop at the pump of these reserves but I wouldn’t hold your breath. Good luck!