Biden's SPR Release Failed to Move Oil Markets - Expect More Failed Policies to Come

The capacity of the Biden Administration for the formulation of bad, counterproductive energy policy is beginning to rival that of the 1970s-era Jimmy Carter presidency. Sure, the Biden people haven’t gotten around to repeats of the Natural Gas Policy Act of 1977, the Fuel Use act of 1978 or the Windfall Profit Tax Act of 1979 yet, but they still have three years ahead of them. So everyone should be patient.

The current President, in a transparent effort to try to slow the precipitous drop in his public approval ratings by being seen as “doing something” about rising gasoline prices, took the step of ordering the release of 50 million barrels of oil from the country’s Strategic Petroleum Reserve on Tuesday. Mr. Biden and his Energy Secretary, Jennifer Granholm, both held press conferences in which they assured us the price of oil would drop as a result of this move, and that would in turn cause gas prices as the pump to drop as well.

Fifty million barrels of oil sounds like a big number, but the reality is that it represents just 1/2 of one day of global energy consumption and less than 2.5 days of U.S. consumption of crude. Suffice it to say, the markets were unimpressed. Six hours after the President made his announcement, this is how the markets had responded to the news:

It turned out that the markets had already priced in the move over the previous few weeks, and in fact had anticipated a larger drawdown, with other nations like India and China chiming in with big releases from their own reserves. But India only came through with a nebulous pledge to release 5 million barrels, and China announced any releases it makes would be based on its own national interests, neither of which is surprising in any way.

In other words, the markets basically laughed Biden’s move off, as Goldman Sachs GS -1.8% was advising that the market’s fundamentals still make the case for higher prices going forward and J.P. Morgan analysts said crude is “remarkably cheap.” Thus, Biden’s gambit here is unlikely to do much to shore up his polling, and the main news out of Granholm’s press conference came when she made clear she has no idea how much oil the United States consumes on a daily basis.

Making matters even more laughable, the Biden order actually authorized the Energy Department, which manages the SPR, to release only sour crude onto the market, a grade of crude that U.S. refiners really don’t like to handle since it requires additional processing to remove Sulphur and other impurities from the stream. Even more distressing, the Wall Street Journal reports that both Russia, Saudi Arabia and other OPEC+ countries are now reconsidering their recent efforts to put more oil onto the markets.

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