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Will using fuel from reserves lower gas prices?
President Joe Biden's new plan to reduce gas prices includes releasing about 180 million additional barrels from U.S. Strategic Petroleum reserve, but will that help bring gas prices down?
DETROIT (FOX 2) - President Joe Biden's new plan to reduce gas prices includes releasing about 180 million additional barrels from U.S. Strategic Petroleum reserve.
Each day for the next six months, one million barrels would be released, leaving around 388 million barrels in reserve. FOX Business reports this is the lowest level since March 1984.
The big question is whether this will lower gas prices.
"I think the impact is going to felt at the pump relatively quickly because the price of oil is actually based on futures, kind of the expectations of what's going to happen in the market," said Dr. Michael Greiner, an economist with Oakland University. "So, for example, the reality is we really aren't feeling a lot of what the impact is as a result of the invasion in Ukraine, in terms of the actual oil that's on the market currently. It's just that there's this expectation that there's going to be less oil available, and so the price goes up."
He said taking from the reserves is a concern.
"Part of the reason that we have that is really to be able to back up our oil supply if there is some disruption," he said.
Greiner also noted that forcing oil companies to use unused leases is "a lot of political rhetoric."
"There's not a whole lot that the president can do to force the oil companies to actually use the leases. And I think that frankly, what the oil companies are there, is they're just watching the price of oil. They want to know that if they're going to invest the money in actually producing oil from these different locations, that there's going to be enough demand to keep the price high," he said.