Biden just took a major step towards solving America's fuel crisisThe White House said it will guarantee buying some oil from drillers to replenish an emergency reserve.
The Strategic Petroleum Reserve is releasing oil at record levels to help cut gas prices.
More gas price relief could be on the way for cash-strapped Americans as the government continues to tap into oil from its stockpile.
On Tuesday, the Biden administration announced it would release even more crude oil from the Strategic Petroleum Reserve (SPR) — and work to replenish that SPR's supply. The White House would do so by establishing a federal guarantee to buy oil from some drillers at preset prices to help restock the SPR.
It seems to be an effort to encourage more domestic drilling during a stretch of a high gas prices. The Energy Department will soon put forward a rule helping them do that.
Per the release from the White House, over 125 million barrels of crude oil have already been sold since the government first began its "unprecedented" releases in March, and the reserve is set to release about 180 million barrels by the fall.
A report from the Department of Treasury estimates that releasing crude oil from the reserves has brought the prices of gasoline down by about 17 to 42 cents a gallon from where it would be without the federal action.
Gas prices began spiking in late February and early March, as the war in Ukraine sent gas prices skyrocketing around the world.
The price of gas has been declining for over a month, the product of a drop in demand. According to the US Energy Information Administration, the price of a gallon hit $4.33 for the week ending July 25. The current average gas price calculated by AAA is $4.327 a gallon, down from $4.90 a month ago.
"Gas prices have declined by an average of 69 cents per gallon over the past 42 days. That's six straight weeks of declines – and the fastest decline in over a decade!" White House Press Secretary Karine Jean-Pierre wrote on Twitter.
Patrick De Haan, the head of petroleum analysis at GasBuddy, wrote on Twitter that 11 states are seeing average prices below $4.
Nearly one in five gas stations is charging under the $4 mark for a gallon of regular gas, according to OPIS, which surveys US gas stations to compute price averages for AAA. That's about 24,000 stations nationwide, mostly in the Southeast and in oil patch states like Texas and Oklahoma.
Because gas makes up about 4.8 percent of the Consumer Price Index (CPI), mathematically, the relatively large declines in the price of gas should bring down the rate of inflation.
Thus, if things continue to trend the way that they have for 41 consecutive days, the falling gas prices should drive down the CPI.
The Fed's plans to raise interest rates again this week could further help combat inflation but warned that the central bank will have to walk a fine line when tightening policy in order not to tip the economy into a recession.
But while gas prices are a driving force for inflation, it is also a measure that notoriously fluctuates based on factors outside of Biden's and the Fed's control.
For example, David Fiorenza, an economics professor at Villanova University, pointed out that the decline in gas prices could be due to the timing of the summer season, which has worked in Biden's favor these last few weeks.
"Demand has fallen off since we have had two major holiday weekends pass, Memorial Day and July 4," Fiorenza told reporters, adding that he expects gas prices to continue to decrease for the rest of July and into August.
President Biden touted falling gas prices in a series of tweets over the weekend as the national average for a gallon of gas fell below $4.50.
The national average for a gallon of gas is now $4.36, according to the transportation organization American Automobile Association (AAA), down from a high of $5 a gallon last month.
Biden tweeted first on Friday that gas prices fell 60 cents over the past 38 days, marking the fifth straight week of decline.
He followed that up with a tweet on Sunday, noting it was now 65 cents over 40 days.
“I grew up in a family where if the price of gas went up, we felt it,” the president tweeted on his personal account. “Gas prices have dropped since mid-June and should continue to come down in the days and weeks ahead. I know those extra dollars and cents mean something.”
The Biden administration has largely blamed supply chain disruptions, Russia’s war in Ukraine and oil companies for the high gas prices and inflation spikes.
“With oil prices coming down 20% from June highs, it’s unacceptable that prices at the pump have only come down by half as much,” Biden tweeted on Saturday. “It’s time for oil and gas companies to pass these lower costs on to Americans.”
Biden on Saturday said the falling gas prices have saved the average American about $30 a month.
“An extra 60 cents a gallon back in your pocket is meaningful,” the president tweeted. ” It’s breathing room.”
AFP
