U.S. to release extra 1 million barrels of oil a day from strategic reserves to battle high prices — and Putin

U.S. President Joe Biden is ordering the release of one million barrels of oil per day from the nation's strategic petroleum reserve for six months, in a bid to control skyrocketing energy prices and put further pressure on Russia to halt its invasion of Ukraine.

Biden made the formal announcement of the plan on Thursday morning, calling the size and scope of the oil release "unprecedented."

"The world has never had a release of oil reserves at this one million per day rate for this length of time," the White House said in a statement. "This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up."

The U.S. previously spearheaded a global move by friendly nations, including Canada, to release 60 million barrels worth of oil from reserves. But the impact of that move didn't last, which led to the decision this week to promise a sustained new release of oil onto the market.

The move shows how the supply and price of energy has emerged as a key vulnerability for the U.S. at home and abroad. Higher prices have crushed Biden's approval domestically, while also adding billions of dollars to the Russian war chest as it wages war on Ukraine.

At one point in early March, oil was trading for $130 US a barrel. That's more than twice what it went for a year ago. 

Markets reacted quickly to the news on Thursday, pushing the price of the U.S. oil benchmark West Texas Intermediate down three per cent to $104 US a barrel.

Normally, high prices would compel producers to pump more, but that hasn't happened this time due to the uncertainty of the ongoing pandemic. The U.S. is producing on average 11.7 million barrels daily, down from 13 million barrels in early 2020. Before the conflict, Russia produced about 10 million barrels of oil per day.

Americans on average use about 21 million barrels of oil daily, with almost half of that devoted to gasoline, according to the U.S. Energy Information Administration.

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In addition to the barrel release, the White House is calling on Congress to impose financial penalties on oil and gas companies that lease public lands but aren't producing energy.

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

Commodity strategist Helima Croft with RBC said the move is a continuation of the "muscular stance" the U.S. administration has taken with a suddenly belligerent Moscow.

"It will be important to see whether this release announcement will be an effective shock and awe tactic given that Russian energy losses are likely to climb as the military campaign intensifies and the humanitarian crisis in Europe grows more dire," she said.