By Nandita Bose, Jarrett Renshaw and Steve Holland
WASHINGTON (Reuters) - U.S. President Joe Biden announced a plan on Wednesday to sell off the rest of his release from the nation's emergency oil reserve by year's end and begin refilling the stockpile as he tries to dampen high gasoline prices ahead of midterm elections on Nov. 8.
Biden is seeking to add enough supply to prevent near-term oil price spikes that could punish Americans, and assure U.S. drillers that the government will enter the market as a buyer if prices plunge too low.
He said 15 million barrels of oil will be offered from the Strategic Petroleum Reserve (SPR) - part of a record 180 million-barrel release that began in May, and added the United States is ready to tap reserves again early next year to rein in prices.
“We’re calling it a ready and release plan,” Biden said at a White House event. “This allows us to move quickly to prevent oil price spikes and respond to international events.”
Biden's use of the federal government's reserve to manage oil price spikes and attempts to increase U.S. production underscore how the Ukraine crisis and inflation have changed the policies of a president who came into office vowing to cut U.S. dependence on the fossil fuel industry.
The White House had an added sense of urgency after the Saudi Arabia-led Organization of the Petroleum Exporting Countries rankled Biden by siding with Russia and agreeing to a production cut, prompting the president to declare that the U.S.-Saudi relationship needs a revaluation.
"With my announcement today, we're going to continue to stabilize markets and decrease the prices at a time when the actions of other countries have caused such volatility," Biden said.
Biden blamed Russian President Vladimir Putin’s invasion of Ukraine for higher crude and gasoline prices, while noting prices had fallen 30% from their peak earlier this year.
He also repeated a plea to U.S. energy companies, gasoline retailers and refiners, asking them to stop using record-breaking profits to buy back stock, and to invest in production instead.
Prices “are not falling fast enough,” he said.
“Families are hurting,” and gasoline prices are squeezing their budgets, he added.
The president, facing criticism from Republicans who charge he is tapping the SPR for political reasons and not because there is an emergency, also said he would refill the nation's stockpiles in the upcoming years.
He said his aim would be to replenish stocks when U.S. crude is around $70 a barrel, a level he said would still allow companies to profit while being a good deal for taxpayers. The U.S. benchmark was around $85 on Wednesday. [O/R]
The SPR, which is now at its lowest levels since 1984, is more than half full with more than 400 million barrels of oil, Biden said, “more than enough for any emergency drawdown.”
The administration's plan was to end the sale of the 180 million barrels in November. However, purchases by companies, including Marathon Petroleum Corp (NYSE:MPC), Exxon Mobil Corp (NYSE:XOM) and Valero Energy Corp (NYSE:VLO), were slower than expected over the summer and some 15 million barrels remained unsold.
Those will be put up for bidding for delivery in December, a senior administration official said.
GRAPHIC: The gap between retail and wholesale gasoline prices https://graphics.reuters.com/USA-BIDEN/GASPRICES/lbvgnbmyqpq/chart.png
PUSHING ENERGY COMPANIES TO DO MORE
U.S. presidents have little control over petroleum prices, but the country's massive gasoline consumption - the highest in the world - means high prices at the pump can be political poison. Retail gasoline prices have fallen from a high in June, but remain above historical averages, and are a major contributor to inflation.
The gap between wholesale and retail prices has grown, too, spurring White House warnings against price-gouging.
Biden said oil companies should feel more confident about investing in production with the new SPR repurchase pledge, and stop pushing stock buybacks.
"So my message to all companies is this: You're sitting on record profits and we're giving you more certainty. So you can act now to increase oil production," he said.
Companies "should not be using your profits to buy back stock or for dividends. Not now, not while a war is raging," he said, asking them to bring down prices they charge at the pump.
In recent weeks, the oil industry has grown increasingly concerned the administration might take the drastic step of banning or limiting exports of gasoline or diesel to help build back sagging U.S. inventories. They have called on the administration to take the option off the table, a move officials are unwilling to do.
"We are keeping all tools on the table, you know, anything that could potentially help ensure stable domestic supply," the official said.