The Biden administration's plan to tap into oil reserves is drawing criticism
RACHEL MARTIN, HOST:
Americans are spending about 50% more for gas than they were a year ago when the pandemic caused a drop in demand. President Biden says his decision to release 50 million gallons of oil from the nation's strategic reserve will help cut gas prices and reduce inflation.
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PRESIDENT JOE BIDEN: It will take time. But before long, you should see the price of gas drop where you fill up your tank. And in the longer term, we will reduce our reliance on oil as we shift to clean energy.
MARTIN: Gas prices are averaging around $3.40 a gallon nationwide. That's according to AAA. But our next guest says releasing oil from the strategic reserve isn't actually a sustainable solution. Tony Fratto is a former assistant Treasury secretary and White House deputy press secretary in the George W. Bush administration. He's now a consultant focused on economic policy. And he joins us this morning. Hey, Tony.
TONY FRATTO: Hey. Good morning, Rachel.
MARTIN: So the logic goes like this, right? Gas prices are high, and so is demand. So just, you know, release more oil, and gas prices will go down. Why is that not a good plan?
FRATTO: Well, you definitely understand the rationale for why they want to do it. People are concerned about gas prices. The problem is that it's not enough gas to make much of a difference in this market. I mean, just to put it into context a little bit, global gas - you know, gas prices are set on a global market, about a hundred million barrels a day. And the president announced releasing about 50 million barrels over the next couple months. So that's, you know, 50 million barrels measured against, you know, a few billion barrels of oil over that time period. So it's not enough to make a big difference. And also, market participants know that it's not sustainable, that it's a one-time thing. So they know there's not more coming. So it's not going to have a big impact from an economic standpoint, but it may help him a little bit from a rhetorical standpoint coming from the White House to show that he cares about what Americans are dealing with right now.
MARTIN: Right. So is this more of a political move? I mean, your former boss, President George W. Bush, released oil from the reserve after Hurricane Katrina, right?
FRATTO: Yeah, I think every president from one time or another has used the Strategic Petroleum Reserve for one reason or another. This is the first time that it's being used simply to address prices. So that is a little bit different. It's been used in the past when there have been supply disruptions like, you know, conflict in the Gulf region or following hurricanes. So it is a little bit unusual this time. And I think that's another reason why people - most people know that it's probably not a sustainable solution.
MARTIN: So there will be people out there, probably listening to this saying, well, if - you know, if the strategic reserve isn't there to help us get some relief with gas prices, what's it there for?
FRATTO: It's there for those reasons that we mentioned. Really, it was created in the '70s following the oil shock, when we were heavily dependent on foreign oil and, you know, caused severe economic reactions I remember, you know, having to go on alternate days to get - you know, fill up your tank with gasoline in the '70s, when it was a real oil shock. It's very different today. You know, we are far less dependent on foreign oil. And we just use, you know, less oil as a share of GDP than we have in the past. So its impact isn't as important today as it was back then. But it is for those - you know, it's - the word strategic mean that there's a - you know, sort of a national security concern, and that's why we should do it, not to manipulate prices.
MARTIN: If I could ask you to pull back a little bit and look at this from a broader economic perspective, what should the Biden administration be doing to fight inflation if just releasing more oil from the reserves is a temporary solution?
FRATTO: They are doing some of the - you know, some of the key things that they should be doing, which is - you know, we should - as we step back, Rachel, we should always remember that the single most important factor for this economy, including inflation, is still COVID, and it is still dealing with COVID-related activity. So getting people vaccinated, getting back to normal spending patterns for Americans - so less clicking on Instagram ads for goods and more spending on services, so rebalancing the economy - would help a bit. Talking about what the Fed is doing. I think that - you know, the Fed is accelerating its tapering. Its release - or reducing its monetary policy support. So we could talk about that. The administration could talk about the support it's giving to families on the margins for a whole range of things, for housing and for child tax credits, to deal with some of the increased prices for the things that are most important to them.
If I was going to make one recommendation that would directly address prices, you know, we could roll back some of those Trump tariffs that we got that are - you know, that are, in fact, increasing prices for American consumers.
MARTIN: But you know this as someone who's an expert in messaging as well, someone who worked in the White House on the communications team, rather. I mean, what's he got to say to make sure that Americans know he's doing what he can? A new NPR poll out this morning finds most Americans disapprove of the job the president is doing on the economy.
FRATTO: Well, it's a tough - yeah, it's a tough place to be. And sometimes you can't message your way out of, you know, big economic numbers. But the one thing you can do is to talk to them about the things that are important to them. So I don't - yeah, I don't criticize them for talking about oil. They should be talking about it. But these are the kitchen-table things that they have to talk about, and they have to have confidence that things are going to get better as we head into 2022.
MARTIN: Tony Fratto of Hamilton Place Strategies. Thanks for taking the time, Tony.
FRATTO: Thanks, Rachel.
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