The Trump administration is actively considering tapping into the nation’s emergency supply of crude oil as political pressure grows to rein in rising gasoline (petrol) prices before congressional elections in November, two people familiar with the situation said.
No decision has been made to release crude from the 660-million-barrel stockpile, known as the Strategic Petroleum Reserve, but options under review range from a 5-million-barrel test sale to a larger release of 30 million barrels, said the people who requested anonymity to discuss non-public deliberations. An even larger release is possible it it were to be coordinated with other nations.
The national unleaded average gasoline price rose to $2.89 Friday, an increase of 63 cents from where it was a year ago, according to data from AAA. The US gasoline price average is expected to range between $2.85 per gallon (3.7 litres) and $3.05 per gallon through Labor Day, according to the group.
And as prices close in on $3 a gallon, Trump hasn’t been shy about voicing his displeasure.
"Oil prices are too high, OPEC is at it again. Not good!" he said on Twitter last month. On the Fourth of July, Trump tweeted: “The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two way street. REDUCE PRICING NOW!”
Oil has retreated since hitting a three-year high in New York at the start of the month, as the trade clash between the US and China threatened economic growth. West Texas Intermediate, the US benchmark, settled at $71.01 a barrel on Friday, up 26 cents for the day but down 3.8% for the week.
Analysts remain split on the effect such a release would have and how long it it last. Depending on its size and timing, an oil sale might leave the market unmoved, or have a real, if fleeting, impact on prices.
"I think a SPR release would have a psychological impact on the market, it may not translate into lower gasoline prices, but it would immediately bring down crude prices at least temporarily until the market adjusts," said Joe McMonigle, senior energy analyst at Hedgeye Risk Management.
A release of crude oil in September or October could cut gasoline prices for consumers ahead of November mid-term elections. Trump could also use it as a tool to persuade buyers of Iranian oil to halt their purchases in the run-up to November 4, when US sanctions against the Islamic Republic are due to snap back.
A modest drawdown is already on the horizon. Congress has already mandated the sale of 11 million barrels starting as soon as October 1.
"I would be very surprised if they were not thinking about it," said Kevin Book, managing director of Washington-based consultancy ClearView Energy Partners.
"The DOE must begin planning its scheduled sales months in advance, so I suspect the timing of a scheduled sale as a market-management tool probably has been on their radar screens for weeks," Book said.
The oil stockpile, which was created in the 1970s after the Arab oil embargo sent prices skyrocketing and forced Americans to ration gasoline, is mainly meant to be used in emergencies. But it has been tapped in the past to bring down domestic gasoline prices, such as by President Bill Clinton in the 1990s, as well as to fund unrelated domestic legislation.
While Energy Secretary Rick Perry indicated he has no interest in utilising the reserve, telling reporters last month it is "there for emergencies," ultimately the decision is up to Trump.
The Energy Department declined to comment and the White House didn’t immediately respond to a request for comment.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER