One of Biden’s top energy aides confirmed Friday the administration won’t extend the oil releases from the Strategic Petroleum Reserve that are scheduled to end this fall.
The Strategic Petroleum Release “was really a stop-gap measure,” says Amos Hochstein, Biden’s Special Presidential Coordinator for International Energy Affairs. “We can’t be an oil supplier. It’s a reserve and so we have to keep that.”
He vowed that ending the releases won’t spur supply shocks, noting that the private sector has assured him that it will be able to ramp up production once there’s no longer access to the reserve.
“I myself had those conversations with the leadership of several of the companies,” added Hochstein, who formerly worked in the oil industry.
At least some companies are investing right now in the months-long process of ramping up production, he said, making him optimistic that the fears of a fall surge in prices may be overblown.
“There’s a little bit of hysteria at the moment in the analysis of oil markets,” he said during Friday’s conversation with Yahoo Finance’s Akiko Fujita.
For example, some experts predicted record-high prices this summer, he noted — but drivers have instead enjoyed a month of declines in both crude oil prices and prices at the pump.
‘Really a stop gap measure’
As of Friday, the price of crude oil was below $95 a barrel while average gas prices in the U.S. were at $4.41 a gallon. Both represent major drops from this time last month.
Hochstein says he has secured promises from CEOs that investments being made now in improvements like drilling profiles and platforms will pay off with an increase of about 800,000 to a 1 million barrels a day towards the end of the year. This would replace, his argument goes, the 1 million additional barrels a day on the market right now because of Biden’s April move to release the oil reserves.
Speaking to Yahoo Finance, Hochstein stuck to his previous prediction that gas prices would soon “come down more towards $4” a gallon, noting that the administration is in a position to keep prices low.
“I can’t guarantee that, there are all kinds of external factors on that,” he said.
‘We’re not going to change’
Still, many oil and gas executives have expressed skepticism of calls to quickly ramp up production.
Energy leaders are wary of being on the wrong side of another boom and bust cycle in gas prices. Just two years ago, oil companies increased production and then faced massive losses when they couldn’t get the new oil to market in time before the bottom fell out of prices.
At one point in 2020, oil prices even went negative.
“Whether it’s $150 oil, $200 oil or $100 oil, we’re not going to change our growth plans,” Scott Sheffield, the CEO of the energy exploration company Pioneer Natural Resources, told Bloomberg in February.
For his part, Hochstein acknowledged that some oil companies are holding out on increasing production. However, he called that position “wrong” and noted that many drivers are suffering at the pump. Those companies could see more pressure when their quarterly earnings reveal massive profits, he noted.
The Biden administration already summoned energy leaders to Washington last month for what a senior adviser described as a “stern message” around their high profits.
“Look at those results [in the coming weeks] and tell me if the American people think these companies should be reinvesting that money back into the economy, back into increased production,” Hochstein says.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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