In the U.S., over the course of the past 12 months, gasoline prices have risen from $2.11 to $3.40 per regular gallon, an increase of 61%, and consumers are increasingly concerned about the quickly rising cost. On Tuesday, the White House announced that it would be releasing millions of gallons of oils from its reserves in a joint effort with China, India, South Korea, Britain, and Japan to lower gas prices.
"I told you before that we're going to take action on these problems. That's exactly what we're doing," President Joe Biden told reporters. "It will take time, but before long you should see the price of gas drop where you fill up your tank, and in the longer-term we will reduce our reliance on oil as we shift to clean energy."
Biden's plan entails releasing 50 million barrels, roughly the amount purchased in the U.S. every 36 hours. Other countries have given much lower release targets, with Britain saying it will allow private reserve owners to voluntarily release 1.5 million barrels, and with India agreeing to release a total of 5 million barrels. Japanese officials have said the country will release a few hundred thousand kiloliters of oil of roughly several million barrels. Other countries have yet to provide specific numbers.
While the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have been resistant to releasing reserves despite repeated calls for them to do so, this coordinated effort may be a stronger catalyst.
"It sends a signal to OPEC+ that the consuming nations are not going to get pushed around any more by them," partner at Again Capital LLC in New York, John Kilduff, told reporters. "OPEC+ has been stingy with their output for months now."
The U.S. release is being described as a combination loan and sale, with 32 million barrels being released on loan and an additional 18 million barrels being sold at an accelerated pace.
The 61% year-over-year increase in gas prices is the fastest rise seen by that metric since 2000. Along with the price at the pump, in recent months, crude oil prices have also hit seven-year peaks.
According to experts, the cause of the current increase in price is the same force that's driving overall inflation: the end of pandemic restrictions and a return to the road. With that in mind, gas prices were expected to fall in the winter months in any case due to the decrease in fuel demand typically seen during that time of year.
On average over the past five years, wholesale gas prices remain 85 cents cheaper compared to the retail price, the price seen at the pump. However, recently, that gap has increased to $1.14 per gallon, and the White House has called on the Federal Trade Commission (FTC) to investigate the widening gap. The upcoming coordinated release also isn't expected to impact the price at the pump any time soon.
"It is unlikely the price relief will be passed down to consumers in the near short-term, unless the Biden administration prioritizes the release of gasoline stocks," senior oil markets analyst at Rystad Energy, Louise Dickson, told reporters.
According to some analysts, releasing reserves isn't going to be good enough, and more needs to be done to bring down prices.
"It's not large enough to bring down prices in a meaningful way and may even backfire if it prompts OPEC+ to slow the pace at which it is raising output," chief commodities economist at Capital Economics Ltd., Caroline Bain, told reporters.
The price you pay for gas is actually a combination of several different costs: the cost of crude oil, the cost of other additives, and the taxes imposed by the state and federal governments. Another method for lowering gas prices currently being proposed by Florida Governor Ron DeSantis is waiving state-level gas taxes.
