The Biden administration is concerned that an escalating conflict in the Middle East could lead to a surge in global oil prices. In an effort to prevent a spike in gasoline prices, administration officials are exploring various options. These include discussions with oil-producing nations like Saudi Arabia, who are currently holding back supply, and engaging with American oil producers to increase production. Another possible measure is the authorization of additional releases from the Strategic Petroleum Reserve, an emergency stockpile of crude oil stored in underground salt caverns near the Gulf of Mexico. President Biden had previously tapped into this reserve after Russia’s invasion of Ukraine caused a drastic increase in oil prices, depleting the reserves to historically low levels.
Although the conflict in the Middle East has not yet caused a surge in oil prices, there is concern that this may change. The price of Brent crude oil was trading around $88 per barrel on global markets as of Wednesday, up from $84 earlier this month. Analysts and administration officials fear that prices could rise significantly if the conflict escalates and restricts the flow of oil from major producers in the region, such as Iran.
Despite these concerns, American drivers have not experienced any significant impact on gasoline prices. The national average price of gasoline was $3.54 per gallon on Wednesday, according to AAA. This is a decrease of about 30 cents compared to a month ago and 25 cents compared to the same day last year.
However, administration officials are cautious of the possibility that prices could surpass $5 per gallon, a level briefly reached in the spring of 2022. It is noted that the measures taken last year to lower prices may be less effective in the event of a new oil shock.
Amrita Sen, director of research at Energy Aspects, commented that the administration may have limited options this time around, partly because they did not replenish the strategic reserve more aggressively when prices were lower. This could undermine their ability to counteract rising prices now.
