7:06 A.M. EST
MODERATOR: Good morning, everyone. Thanks so much for joining us this early for this background briefing. Some ground rules before we dive right in: This call will be on background, attributable to “senior administration officials.” This call will not be embargoed.
Not for attribution but just for everyone’s awareness, for those on the call, our speaker is going to be [redacted].
As many of you have just seen, a factsheet just hit your inboxes and was posted to the White House website announcing that President Biden will be announcing a release from the Strategic Petroleum Reserve as part of ongoing efforts to lower prices and address the lack of supply around the world.
To dive a little bit more into this, I’m going to turn it over to our first speaker, [senior administration official].
SENIOR ADMINISTRATION OFFICIAL: Thanks so much. And thanks everyone for joining early in the morning.
Since President Biden took office, we’ve seen an historic economic and jobs recovery in the United States. According to the OECD, the United States is the only major economy that has exceeded its pre-pandemic level of GDP. The economy has created 5.6 million jobs since February and has achieved an unemployment rate of 4.6 percent two years earlier than the Congressional Budget Office projected before the American Rescue Plan was enacted.
Due to rising wages and assistance provided by the American Rescue Plan, disposable income per capita is up more than 2 percent in real terms, or around $100 a month. And this is a direct result of the American Rescue Plan and the President’s strategy to get Americans vaccinated.
Despite all of that progress, the President has acknowledged that we still have work to do. This is especially true when it comes to the issue of rising prices, which are affecting families’ outlooks and pocketbooks. That’s why the President is focused on passing his Build Back Better Agenda, which will ease inflationary pressures over the long term by boosting the capacity of our economy and reducing key costs for working families in the near term.
Beyond Build Back Better, the President has instructed his team to look for way additional ways that he could use his legal authorities to help reduce costs for American families right now.
One of the biggest sources of increased prices for families across the country is gas prices. Transportation costs, including gas, are the second largest costs for families.
The increase in gas prices has occurred because global oil supply has not kept pace with global oil demand as the economy has recovered from the pandemic and as countries and companies have held back on supplying oil, and because the declines in oil prices that we have seen have not translated into lower prices at the pump. The President is taking action on both fronts and is committed to using every tool as needed.
That is why today we are announcing that the Department of Energy will make available a release of 50 million barrels of oil from the Strategic Petroleum Reserve to lower prices for Americans and address the mismatch between demand exiting the pandemic and supply.
I will let my colleagues talk about the international piece of this and also the specifics of the release, but I want to note two more things before turning it over.
First, in addition to a lack of oil supply that is driving up costs for families, the President is focused on how consolidation in the oil and gas sector may be resulting in anti-competitive practices that keep American consumers from benefitting when oil prices fall. There is mounting evidence that declines in oil prices and the costs of other inputs into gasoline are not translating into lower prices at the pump. Last week, the President asked the Federal Trade Commission to examine what is going on in oil and gas markets and to consider “whether illegal conduct is costing families at the pump.”
Second, we are committed to continue supporting our strong economic recovery and making sure oil and gas are affordable as the economy emerges from the pandemic. And at the same time — and this is consistent — the administration will continue to push to achieve our ambitious clean energy goals and giving Americans additional low-cost sources of energy over the long term.
This is reflected in the historic Bipartisan Infrastructure Law signed last week and the House-passed Build Back Better Act that together represent the largest investment in combatting climate change in American history and are critical steps towards reaching a net zero emissions economy by 2050, reducing our dependence on foreign fossil fuels and reducing the cost of energy over the long term.
With that I’ll turn it over to [senior administration official].
SENIOR ADMINISTRATION OFFICIAL: Thanks, [senior administration official]. The President and the foreign policy team have been using diplomacy to support an inclusive global economic recovery for working families, and that obviously includes reliable and stable energy supplies.
The President has been working with countries around the world to address the supply challenges as the world exits the pandemic. He has discussed it in conversations with other leaders, as you’ve seen in the readouts we’ve put out of his conversations, and so have other members of his team. Throughout the G20, President Biden stressed this issue as well, and leaders committed to working together on, among other things, paths to enhanced energy security and markets stability.
So, as a result of President Biden’s leadership and our diplomatic efforts, this release will be taken in parallel with other major energy-consuming nations, including China, India, Japan, the Republic of Korea, and the United Kingdom. This is the first time we have done something like this in parallel with other major energy-consuming nations.
I also want to note that we are already seeing the effect of the President’s leadership and diplomacy on this issue. This announcement culminates weeks of consultations with countries around the world. And over the last several weeks, as reports of this work became public, oil prices are down nearly 10 percent. And the release announced today will begin to move barrels of oil to the market as early as mid- to late-December, depending on market take-up.
We will continue talking to international partners on this issue. The President stands ready to take additional action if needed and is prepared to use his full authorities, working in coordination with the rest of the world, to maintain adequate supply as we exit the pandemic.
With that I will turn it over to [senior administration official] to speak to the specifics of the release.
SENIOR ADMINISTRATION OFFICIAL: Thanks. Let me just give you all a quick rundown of how this is going to work, in terms of this SPR release. As many of you know, the SPR is the world’s largest supply of emergency crude oil. And the federally owned oil stocks are stored in underground salt caverns at four storage sites in Texas and Louisiana. The SPR has been a critical tool with a long history of protecting our economy and American livelihoods in times of economic challenges.
In this immediate circumstance, we’re making available 50 million barrels, as my colleague said, and we’ve tailored our plan for the particular market circumstances that we’re currently facing.
Part one of the plan involves what’s called “an exchange.” The oil market is currently backward-dated, meaning that the markets expect prices to decrease into 2022 from around $80 barrels — $80 per barrel now, to $62 per barrel by the end of 2022.
But as the President has said, consumers are facing pain at the pump right now. Accordingly, we’re deploying this exchange mechanism of up to 32 million barrels to get more supply of oil from the SPR out quickly to reduce the current impact on consumers.
Under the exchange, market participants will take oil now and return it later when prices are lower, with a premium of additional oil coming into the SPR. This means we will actually slightly increase how much total oil we have in the SPR over time. Essentially, the exchange creates a bridge from today’s high-price environment to a period of lower prices into the future.
We’ve used exchanges quite frequently in a variety of circumstances. At DOE — in 2000, for example, DOE did a similar, broader exchange along the lines we’re deploying now, with a similarly backward-dated market.
We’ve drawn up the specifics of the current exchange, again taking into account all the particulars of the immediate situation, and we’ll be sharing detailed materials to potential market participants over the next 24 hours, including the specific terms for such exchanges.
So that’s — part one is the exchange.
Part two of the plan involves a sale of an additional 18 million barrels from the SPR. These 18 million barrels are ones that Congress has already required us to sell but we have flexibility when, specifically, to do the sale. The execution of the sale will follow the exchange and could be noticed as soon as next month.
We believe these two tools are particularly well tailored, again, for the specific market situation we’re currently facing and what could happen over the next several-month period of time.
And as [senior administration official] said, thanks to U.S. leadership and diplomatic skill, we also have other countries that will be making releases of their own, which will also help consumers around the world.
Finally, as the factsheet mentions, the President stands ready to take additional action beyond the measures that we’re currently announcing today.
Again, thanks for everybody joining us today.
MODERATOR: Thanks, [senior administration official]. We now will take some brief questions before we wrap. So if you have a question, please use the raise-hand function on the Zoom interface, and we will try to get through a couple.
First, why don’t we go to Ari Natter with Bloomberg. Ari, you should be able to unmute yourself.
Q Great. Thanks. Can you hear me okay?
MODERATOR: Yep, go ahead.
Q Great. So, I know one of the options that the White House has been considering is a ban on crude oil exports. Can you say if that’s still under consideration, or has that been taken off the table?
SENIOR ADMINISTRATION OFFICIAL: So, you know, I think what the — as the President has said, you know, we continue to look at all available tools. With that said, we think that the action taken today represents an important step forward to supply the needed oil onto the market, given the fact that supply has been — not been keeping up with demand.
We think that is an important step forward. And, you know, we will continue looking at all options looking ahead.
SENIOR ADMINISTRATION OFFICIAL: Ari, if I could just add — this is [senior administration official] — there’s been a very rigorous process here trying to figure out what the particular tools are that are best suited to the particular market circumstances as I walk through. And so, that’s why we made the decisions that we’ve made in this particular circumstance — just to add on to what my colleague said.
MODERATOR: Next, let’s go to Matt Egan from CNN.
Q Thanks, guys, for taking the questions. I’m wondering whether or not you view this as, you know, sort of a long-term solution here to the underlying issues in the energy market or if this is more of a short-term fix.
And I’m also wondering whether or not you expect oil prices will come down even further in the days and weeks ahead, or has the market already, you know, sort of priced this in.
SENIOR ADMINISTRATION OFFICIAL: So, a few thoughts — and I would love to turn it over to my colleagues. First, I think the challenge we have right now, and it really goes to exactly what [senior administration official] was discussing, is an immediate challenge of supply not keeping up with demand as the global economy has exited from the pandemic.
So, we actually think that the tools we are deploying right now are exactly suited to the kinds of circum- — to the circumstance we face now.
And in fact, as [senior administration official] was also discussing, you know, there’s an expectation among markets and others that oil prices will, in fact, be falling, looking into the future — in part, the reason why one of the tools being used here is an exchange.
So, you know, we think that this is an immediate challenge that we face as we are exiting the global pandemic. And if supply is not kept up, we think that this tool is exactly suited to that.
Obviously, we also have views about the long-term future of the energy markets, including the kinds of investments we think that should be made in clean energy and to address both climate change to provide low-cost energy sources for Americans.
You know, in terms of price, I think it’s important to set — to note and just really emphasize exactly what [senior administration official] already said, which is that over the last several weeks, as the President has helped sort of to lead the world in — on — in this — in the parallel actions that are being taken, news, as you of course all have been following, has been breaking about the efforts underway.
In that time, we’ve seen oil prices fall by nearly 10 percent. We think that this action represents sort of the culmination of that work. We, of course, think it’s not just important for oil prices to fall but prices to fall at the pump, which is why we’re also so focused on making sure that prices pass through quickly to consumers as they should.
SENIOR ADMINISTRATION OFFICIAL: Just to add — and completely agree, and I think [senior administration official] put it incredibly well to answer the two questions: This is a President — and certainly my immediate boss here, [senior administration official] — who are as empathetic as anyone I’ve ever worked with.
And consumers are facing challenges at the pump right now. And we are trying to deal with that situation and to deal with it in a smart way, in a tailored way, in an aggressive way. So that’s what you’re seeing today.
MODERATOR: Thanks so much. Next, let’s go to Josh Boak with the Associated Press. Josh, you should be able to unmute yourself.
Q Hi, thanks so much for doing this call. Very quick on all of this, what does the administration expect the responses from Saudi Arabia, Russia, OPEC nations will be to this move, given the idea that they’re going to want to protect the prices and profits? And have you talked to them at all about this?
SENIOR ADMINISTRATION OFFICIAL: Thanks for the question. So we have been in close communication with a wide range of countries, certainly beyond those that I listed as participating in parallel with us in the release that’s being announced today, and that includes major producing countries.
I think the President and other officials have been clear that our preference was for other producing countries to take action. But we also made clear that we would use the tools at the President’s disposal to respond to the current price and supply environments, and that’s what we’re doing today.
You know, the OPEC Plus have said that they are planning to release an additional 400,000 barrels a day, starting in December, and our hope and expectation is that they will continue on that course.
MODERATOR: Thanks. Next, let’s go to Tim Puko with the Wall Street Journal.
Q Hi all. Thank you much for doing this. I want to point out that the law says that the government can do this in case of an emergency. And you’ve established that or acknowledged that there are a lot of signs that production output is, in fact, increasing. IEA said that, you know, there’s going to be a surge in output coming up in the months to come and that future-looking prices even show that.
So, I’m just kind of wondering how you square that — like if a short-term price rise is, one, an emergency. And then, two, if this means you are all thinking differently about the purpose of the SPR and how to use it; if you now see this as a tool that can be used more frequently than in the past, just to address, you know, your price changes in the market when there’s a sharp rise or maybe even a sharp fall.
SENIOR ADMINISTRATION OFFICIAL: So, happy to take this one. This is [senior administration official]. And thanks for the question, Tim.
We’ve really tried to tailor this, as I said, to the particular market circumstances — this particular two-pronged release — and it’s not an emergency release.
So we’ve got broad authority to do exchanges in a variety of circumstances. We’ve done a variety of exchanges over many years. 2000 is a pretty analogous situation with a similarly backward-dated market.
And it’s really, as I was saying, a tool to try to bridge higher prices now to a market that’s going to lower prices, or at least that’s what analysts, including our own independent EIA, expects over time.
So it’s a particular tool that’s tailored for the particular circumstances. This is not an emergency sale. This is not that category that we have at the disposal — that the President has at his disposal.
And then the sale portion of it — the 18 million barrels — is a sale that’s already been congressionally mandated. We just have flexibility on the timing of that sale. So we’re going to use that sale — the timing of that sale — to maximum impact, again, to help American consumers.
Hopefully that clarifies things for you.
SENIOR ADMINISTRATION OFFICIAL: And just to add a few words to what my colleague said — just adding on there — you know, and to my colleague’s point, this uses the Strategic Petroleum Reserve, exactly as intended, in terms of the two ways that oil is being released. And it really is responding to the — a once-in-a-century pandemic and the supply of oil that hasn’t kept up with demand as the global economy has emerged, raising prices at the pump.
And there are the existing authorities, as my colleague was saying, that allow us, working in parallel with the rest of the world, to address — to take real action to address those challenges Americans are facing as a result.
MODERATOR: Thanks so much. Next, let’s go to Ylan Mui with CNBC.
Q Hi, guys. Thank you so much for doing this. My question is whether you guys might be hoping to reach a certain price, either for oil or for the price at the pump or a certain level of decline with this announcement. What would you guys consider a success? What are you hoping to see in terms of prices in the market?
SENIOR ADMINISTRATION OFFICIAL: So, first, I think we’ve already seen, over the last several weeks, as the President and members of his team have worked across the world to — so that major energy-consuming countries would take action in parallel — prices fall by nearly 10 percent in terms of the price of oil.
But, as we’ve said, just having oil fall is insufficient; we need to make sure that relief is reaching American consumers. That’s why we’ve been so focused on making sure that consolidation in the oil and gas market isn’t leading to anti-competitive behavior, which is not passing through those savings to consumers.
And to my colleague’s point, a point that he also made earlier: We right now see a market in which — as we are emerging from the once-in-a-century pandemic and because supply has not kept up with demand — where we have high oil prices right now and an expectation of falling oil prices looking ahead.
And, as a result, we think that the action that the President is taking — is directing today is entirely appropriate for the circumstances, helping to pull forward that kind of relief in prices to the present time.
SENIOR ADMINISTRATION OFFICIAL: Yeah, maybe just to underscore — and my colleague made this point very, very eloquently: The markets have been out of whacks since COVID hit. And we had prices go incredibly low, and now we have prices going high and supply not matching demand and causing a lot of pain at the pump for American consumers.
And so, what we’re trying to do is use the tools that we have, use them tailored for the particular circumstances in really viewing this exchange, in particular, as the bridge from high prices to lower prices, and alleviating that pain at the pump for consumers now.
MODERATOR: Thanks so much. And I think we unfortunately have time for one last question. So, with the last question, why don’t we go to Shannon Pettypiece. Shannon, you should be able to unmute yourself.
Q Hi, I just wanted to ask one about the timing. I know you just mentioned a moment ago that prices have been out of whack for a while — they’ve been too high, too low. There’s been this mismatch of supply for a while. So, why did you decide to do it now?
And then, I guess the other question on the timing front, which I know a few of us have tried to get to, but if you’re a consumer hearing this news now, what can the consumer expect? When could they expect to see prices go down? What should the expectation for the public be, based on this announcement, for what they’re actually going to go see at the gas pump?
SENIOR ADMINISTRATION OFFICIAL: So, you know, first, as, of course, many of you have been reporting, this really represents the culmination of, now, several weeks of work by the administration — in fact, months of work on this front.
We’ve been calling out, for some time, the fact that supply was not keeping up with demand on the global oil market as a global economy was emerging from the pandemic. You know, in the last several weeks, we’ve, of course, been discussing with other oil-consuming nations possible response like we’re seeing today.
So, you know, this was really some time in the making, in terms of our continued focus on this area. And obviously, today is when — especially working in parallel with other countries, we sort of — we’ve reached sort of the culmination of this set of work in order to provide relief to consumers.
In terms of when consumers will see relief, we think that it needs to be soon and should be soon. Importantly, though, we’ve seen, over recent weeks, fall- — especially as reports have come out about the actions that we were considering — falling oil prices, falling prices of unfinished gasoline.
And, you know, we — and we have to be upfront: Right now, the gas at the pump has — so far hasn’t gone down significantly.
That’s why, you know, we see our actions here is two-pronged: first, making sure that the price of oil is coming down, reflecting the fact that we have to have supply matching demand, but also making sure that those savings are being passed through to consumers, which is why the President directed the Federal Trade Commission to investigate to see if there are anti-consumer practices in the oil and gas industry reflecting consolidation there.
But we expect the industry to be passing through these savings to consumers as quickly as possible.
SENIOR ADMINISTRATION OFFICIAL: Just to add a few points: one, that it’s a very dynamic market, and we have certainly been not only closely monitoring the market and seeing where things would go based on what decisions others have been making — other countries, companies, et cetera — along those lines, but doing a lot of spadework so that we can have tailored tools for the particular circumstances as we currently face them.
As my colleague mentioned, gasoline prices people pay at the pump does have a time lag with oil prices. And so, there is a period of time when oil goes down and then gasoline prices would normally go down.
The FTC inquiry, of course, is to make sure that the markets are working as the markets should work. And what we’ve got — with these 50 million barrels, with the exchange in the sale — are flexible tools over this next several-month period of time for us to make adjustments as we need to to deal with a dynamic market in which not everything is in our control.
But we have these tools on the table. We can do the sale a little bit earlier, a little bit later — depending on how the exchange is working, depending on how the market is and consumers are being impacted. So that’s the phase that we’re in here.
MODERATOR: Thanks so much, everybody. And thank you again for getting up early and joining us. As a reminder, this call is on background, attributable to “senior administration officials,” and a factsheet hit your inboxes beginning of this call and is also posted on the White House website, as well as Department of Energy, just about their press release on this as well. So plenty of paper out there for you.
Thanks again. Looking forward to talking to you all soon. Please reach out to the Press Office if you have any other questions.
7:33 A.M. EST