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Oil surges after US announces plans to tap emergency reserves to tackle rising gas prices

Tapping emergency oil reserves comes as Americans are paying the highest pump gas prices since 2013. ...
Oil workers drilling for oil on rig
  • Oil prices jumped more than 2% Tuesday following plans by the US to tap emergency oil reserves to lower gas prices
  • West Texas Intermediate and Brent oil prices had initially pulled back following the US announcement. 
  • President Joe Biden's move comes as American consumers are paying multi-year high gas prices. 

US oil prices surged Tuesday following plans by the Biden administration to release oil from the country's emergency stockpile in an effort to combat the high gas prices that consumers are paying. 

West Texas Intermediate crude prices climbed as much as 2.6% to $78.75 per barrel and Brent, oil's international benchmark, picked up 2.8% to $81.94.

Early Tuesday, President Joe Biden authorized the Energy Department to release of 50 million barrels of oil from the US Strategic Petroleum Reserve "to lower gas and oil prices for Americans," he said in a statement. 

"The move wasn't the game-changer that it could have been and only provides short-lived support," wrote Craig Erlam, senior market analyst at Oanda. "Instead it appeared to serve more as a warning to OPEC+ to not ignore consuming countries."

The move comes as energy prices have contributed to the fastest spike in inflation since 1990. Consumer price inflation hit 6.2% in October, with gasoline prices climbing 6.1% in October alone.

WTI and Brent oil prices initially declined after Biden's announcement but eventually bounced higher. 

"The SPR release news was clearly priced in. There is a bullish risk now when OPEC+ meets next week —  they might slow the increases in production given prices finally nearing fiscal breakevens, expected oil surplus in '22, and concerns about oil demand given 4th wave of COVID," wrote Anastasia Amoroso, chief investment strategist at iCapital, in a Twitter post. iCapital is a fintech firm that connects institutions and financial advisors for wealthy investors with alternative investments like private equity and hedge funds.  

The $3.38 average price for a gallon of gas recorded in November was the highest since 2013, NBC News reported, citing the Energy Information Administration.

China, India, Japan, South Korea, and the UK were also planning to release oil from their reserves, the White House said. 

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