US set to tap into strategic oil reserve to reduce fuel prices

With fuel prices at record highs amid surging inflation and a war raging in Eastern Europe, the United States is tapping into its strategic oil reserves, which the White House says should help take the pressure off the cost of gas.

Effective immediately, the strategic petroleum reserve is set to dispense approximately 1 million barrels of oil per day, President Joe Biden announced from the White House recently. This will be carried out daily for the next six months, which will be an extra 183 million barrels of oil on top of the approximately 20 million barrels Americans consume in the typical day.

In a press release, the White House noted that this move is a first for the country, in terms of the length of time and the amount oil drawn from the reserve since it was created back in 1975.

"The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time," the Biden administration said. "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."

A barrel of oil contains approximately 42 gallons.

For the better part of two years, regular unleaded gasoline and diesel prices have steadily climbed. Indeed, for the week of March 28, the average price for a gallon of gas nationwide was approximately $4.23, according to the U.S. Energy Information Administration. That's up by nearly $1.38 from a year ago and by over $2 for diesel, with a gallon of this fuel type averaging $5.18. In several parts of the U.S., prices for both diesel and regular are well above $5.

The supply chain has felt the impact of surging gas prices. Because oil largely fuels the economy — used to make plastics, power vehicles and equipment and heat buildings — business owners have raised their prices to offset the fact that they're spending.  Sticker shock has forced some consumers to then scale back what they buy.

Are gas prices poised to decrease?
Will the additional 1 million barrels of oil will notably reduce the pain at the pump?  Economists are skeptical, including Wells Fargo Securities' Roger Read, a senior analyst for the investment bank.

"I don't want to make it sound like it's nothing, but you just arrive at the issue where we may be off a lot more than just 1 million barrels," Read told CNBC. "So it helps, but it's unlikely to solve the problem," he said. "In the end, it's a little bit of a Band-Aid and I think a little bit of hoping to get later in the year [Organization of the Petroleum Exporting Countries] will catch up."

Although it was initially reluctant to increase output, OPEC says it will produce an additional 432,000 barrels of oil per day starting May 1, CNBC reported. OPEC represents over a dozen countries, most located in the oil-rich Middle East.