To combat fuel prices that have risen at the fastest rate ever recorded by the Energy Department, President Biden on March 31 announced an unprecedented release of crude oil from the nation’s Strategic Petroleum Reserve.

The administration will put 1 million additional barrels on the market per day on average — every day — for the next six months. The Department of Energy will use the revenue from the release to restock the Strategic Petroleum Reserve in future years. Other countries are expected to join in this action, bringing the total release of petroleum reserves to over an average 1 million barrels per day, according to the White House.

The second largest release from the SPR on record was the 50 million barrel release last November. The Strategic Petroleum Reserve is a U.S. government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coasts. 

Oil prices dropped sharply Wednesday night, even before the official announcement on Thursday.

The national average price of a gallon of diesel hit a record high of $5.25 on March 14, according to the Energy Department. When adjusted for inflation, prices are still lower than the all-time highs of 2008. However, the agency has never seen retail fuel prices increase so quickly on a percentage basis over a three-week period.

Is SPR drawdown the right move?

Some analysts and observers were concerned about potential negative impacts of the SPR oil release.

On Twitter, Patrick De Haan called the SPR release “short term gain, long term pain.” De Haan is the head of petroleum analysis at GasBuddy, which tracks gasoline prices. The move will put the reserve at its lowest level since 1984. That could limt the ability of the government to respond to emergencies such as a hurricane disrupting oil production in the Gulf of Mexico.

“We’re going to be drawing down inventories just as we’re going to be needing them in a time of uncertain supply conditions,” De Haan said.

For all those "expert" charts trying to explain the rise in #gasprices since 2020, I made the actual chart explaining gas prices for you. pic.twitter.com/LhydcLeY6T

— Patrick De Haan ⛽️📊 (@GasBuddyGuy) March 10, 2022

In a research note Thursday, Goldman Sachs commodity analysts said the release from U.S. reserves would help the oil market toward rebalancing in 2022, but would not resolve its structural deficit, according to a CNBC report.

CNBC reported that Goldman Sachs predicted that lower prices in 2022 would support oil demand while slowing the acceleration in U.S. shale production, leaving a deficit in 2023 and a likely need to refill the U.S. reserves.

Domestic oil production

While high fuel prices have led some to criticize the Biden administration for enacting policies that discourage production, those claims are largely untrue. In fact, the Energy Department predicted in February that U.S. crude oil production will rise in 2022 and 2023 to record-high levels.

“The fact is that there is nothing standing in the way of domestic oil production,” said a White House statement. “There are oil companies that are doing the right thing and committing to ramp up production now. 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.”

However, the White House charged that “too many companies aren’t doing their part and are choosing to make extraordinary profits and without making additional investment to help with supply. One CEO even acknowledged that, even if the price goes to $200 a barrel, they’re not going to step up production.”

The oil and gas industry currently have 9,000 approved but unused permits for production on more than 12 million acres of non-producing federal land, according to the statement.

Right now, the oil and gas industry is sitting on more than 12 million acres of non-producing Federal land with 9,000 unused but already-approved permits for production. The president called on Congress to make companies pay fees on wells from their leases that they haven’t used in years, “and on acres of public lands that they are hoarding without producing.”

Several industry analysts told Yahoo Finance that even with oil prices above $100, drillers are reluctant to pump more. It’s expensive to expand capacity, and they fear they’ll lose money if (or more likely when) the additional oil supply pushes prices back below $60 or $70 per barrel.

The White House emphasized that all of this is a short-term solution, saying in the long term, it’s important to transition to clean energy.

Department of Energy Jennifer Granholm said in a statement, “Putin’s actions in Ukraine and the resulting disruptions to global energy markets have demonstrated the urgent need to accelerate our clean energy transition, which will make our country more energy independent and much less vulnerable to the whims of dictators.”