White House sets its sights on true energy independence

One could make the case that the plan President Biden announced today to put one million additional barrels, from the nation’s Strategic Petroleum Reserve (SPR), on average—every day—for the next six months does not come as a huge surprise.

And there is no reason for it to be surprising, given the significant run-up in gas and oil prices since the beginning of the Russia-Ukraine conflict, with freight transportation and supply chain stakeholders, as well as consumers, feeling tremendous pain at the pump. Case in point: this week marked the third straight week the average price per gallon of diesel topped the $5 per gallon mark, for the first time ever.

What’s more, in his February State of the Union address, President Biden said that the U.S. is working with 30 other countries to release 60 million barrels of oil from reserves around the world, with the U.S. leading that effort and releasing 30 million barrels from its own Strategic Petroleum Reserve, and is prepared “to do more, if necessary, unified with our allies.”

As previously noted in this space, that is not only timely, but it is also a necessary step, given the pain at the pump for U.S. consumers and businesses alike, coupled with the fact that the U.S. was purchasing oil from Russia, with about 8% of U.S. imports of oil and refined products, or about 672,000 barrels a day, coming from Russia last year, according to a Wall Street Journal report.

Since that speech, the U.S. has banned importation of Russian oil, which received bipartisan support in Congress, with the caveat, as noted by the White House today, that Russian oil coming off of the global market would come with a cost—that cost being that aforementioned pain at the pump.

Along with the SPR withdrawals, the White House made its case for increasing domestic production, noting that the U.S. is already approaching record levels of oil and natural gas production.

“There are oil companies that are doing the right thing and committing to ramp up production now,” it said. “Right now, domestic production is expected to increase by 1 million barrels per day this year and nearly 700,000 barrels per day next year.”

But that comes with the caveat that some companies are not willing to step up production, even if oil were to shoot up to $200 per barrel.

The planned SPR release represents the largest release of oil reserves in history, according to the White House, calling the scale of this release unprecedented. It also noted that this release will provide what it called a “historic amount of supply to serve as a bridge until the end of [2022],” when domestic production increases.

“The Department of Energy will use the revenue from the release to restock the Strategic Petroleum Reserve in future years,” said the White House. “This will provide a signal of future demand and help encourage domestic production today, and will ensure the continued readiness of the Strategic Petroleum Reserve to respond to future emergencies.”

The White House made the point that even though the U.S. is the world’s largest oil producer and a net energy exporter, the U.S. is feeling the impact of the Russia-Ukraine war at the pump. This serves as a key driver for President Biden to call on Congress to sign off on his plan to achieve energy independence and, in turn, reduce the nation’s dependence on oil.

That objective will be met in a few different ways, according to the White House, including: issuing a directive to authorize the use of the Defense Production Act to secure American production of critical materials to bolster the nation’s clean energy economy by reduction reliance on China and other countries to boost the nation’s clean energy economy; and to also review potential further uses of the Defense Production Act, along with minerals and materials, to secure safer, cleaner, and more resilient energy for America.

Various high-profile organizations have called on the White House and Congress to step up their energy independence efforts recently.

Earlier this month, American Trucking Associations (ATA) President and CEO Chris Spear pulled no punches, regarding the current state of gasoline prices in the United States, in calling on the Biden Administration and Congress “to get real about American energy independence.”

Spear was clear and direct in addressing the need to the U.S. to be energy independent, saying: “the horrific war in Ukraine makes crystal clear why we need to increase domestic energy production, and must eliminate energy reliance on nations that pose a threat to our national and economic security.  The millions of Americans who keep our country moving forward should not be put in the position of having to spend a single dollar on Russian fuel that lines the war chest of a genocidal tyrant.”

And he did not stop there, adding that the nation’s addiction to foreign energy sources not only empowers America's most dangerous adversaries, but it's also having a serious impact right now on trucking’s ability to keep costs down for its customers and also throughout the supply chain.

Marty Durbin president of the U.S. Chamber of Commerce's Global Energy Institute, said that the U.S. Chamber agrees with President Biden that American oil and gas production is essential to relieving high fuel prices and to energy security for the U.S. and our allies, but with a significant difference of opinion in how to get there.

“The Administration continues to mischaracterize the obstacles to ramping up production, one of which is their own reluctance to process permits,” said Durbin. “American energy companies have paid significant funds for leases and have every incentive to produce energy where they can. However, it takes years and many permits to explore for energy and even then, not every well drilled on a federal lease is ultimately suitable for energy production, which the Administration continues to ignore. Further, punitive policies and rhetoric send exactly the wrong message to industry and its investors at a time when the Administration should be seeking to collaborate, not punish. America clearly needs to develop a robust and homegrown strategic minerals supply chain, so we appreciate that recognition in today’s announcement. However, the Administration should develop a comprehensive strategic minerals strategy in collaboration with stakeholders so that U.S. mining projects and processing facilities get the regulatory approvals they need.”

The White House’s plan is certainly a step in the right direction, but, at the same time, does not solve all of our energy problems instantaneously. Much work needs to be done to achieve true energy independence, no doubt. I think we will eventually get there, but, to be sure, there will be some bumps in the road along the way, as there are now, with the current state of oil and gas prices.