Oil: How the Release of U.S. Reserves Affects Prices

Tuesday, the President Joe Biden wanted to make a gift of Thanksgiving to American drivers, and announced the largest release of stored oil in the history of the country in an attempt to lower the price of the gasoline.

It is a surprising measure for a politician who at the time promised to make the fight against the climate change one of his priorities and that, in the race to White House assured that there would be “a transition in energy policy away from fossil fuels.

What was announced?

USA I announced that I will release 50 million barrels of oil from his Strategic Petroleum Reserve, created in the wake of the oil crisis of the 1970s.

The United States against OPEC for oil: releasing 50 million barrels of its strategic reserves to stop the rise in prices

United Kingdom, India, South Korea, Japan and China They have also advanced their intention to draw on oil reserves. In fact, United Kingdom plans to release up 1.5 million barrels and India I will do the same with 5 million barrels. The consultancy Energy Aspects is convinced that in a few days China will publish its figures to distance itself from Washington’s statements.

The US figure equates to roughly half a day of world oil demand, which amounts to about 100 million barrels a day (b / d). In total, some 32 million barrels will be released between mid-December and the end of April 2022, according to an agreement reached with the oil companies, which will then have to return an equivalent volume in 2024. The other 18 million barrels accelerate sales that the Congress had already authorized.

Why now?

So far the other attempts to control gasoline prices, such as petitions to Saudi Arabia Yet the OPEC increased oil production, they have failed.

According to analysts, announce plans to release more fossil fuels before the climate summit COP26 this month would have been politically uncomfortable. The administration also needed time to negotiate with partner countries.

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On the other hand, control the inflation it has become another priority issue. Republicans believe the energy policy of Biden is responsible for gasoline prices being 60% higher than a year ago.

“Given the economic crisis unprecedented pandemic, obstacles to recovery, and current concerns about inflation“It’s understandable that the administration took this step,” said Jason Bordoff, co-founding dean of the Columbia Climate School.

Will there be a price drop?

The oil market had a release of reserves greater than advertised by USA The announcement of Biden Tuesday caused a rise in crude oil; the barrel of Brent, of international reference, stood at 3.3%, or $ 82.31.

In the opinion of Jamie Webster, senior director of the BCG Center for Energy Impact, “as you can see from the prices, the news is not having the desired effect.”

Amrita Sen, research director at Energy Aspects, is convinced that the release is “a symbolic measure” that would have little long-term impact. The release could last six months and, in any case, the oil will have to be replenished.

The traders will now focus on the next meeting of the OPEC, scheduled for December 2. The group of producers led by Saudi Arabia It has increased supply by 400,000 b / d a month while recovering the production levels it cut last year. However, according to analysts, now it could interrupt this increase.

How to evolve geopolitics?

Until Tuesday’s announcement, the largest US oil release occurred during the civil war of 2011 in Libya, when crude prices threatened to exceed $ 120 a barrel. The International Energy Agency (IEA) coordinated that release, which was supported by Saudi Arabia.

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The IEA It was not implied on this occasion and some European countries are opposed to using the reserves for political reasons. In this case, the White House has turned to the countries with the highest consumption of Asia, underscoring a shift in market forces since the industrialized countries created the IEA after the 1973-74 oil crisis.

The release can also mark a new twist in US relations and the OPEC. It was Donald trump who convinced Saudi Arabia and Russia, during the brutal oil price crash last year, why would reduce production, in an attempt to prop up prices and avoid the collapse of unconventional hydrocarbons. Now the US is asking for the opposite.

What could America’s next move be?

The US Energy Information Administration. assured that, even before Tuesday’s announcement, there was already a possibility that the oil prices and gasoline will drop anyway next year.

If these expectations are not met, “the president is looking at other options and there are many tools on the table,” US Secretary of Energy Jennifer Granholm said Tuesday.

According to analysts, a prohibition of crude oil exports, which were first liberalized during the Obama administration, is another possibility, albeit remote. Another option is reduce the biofuel component in gasoline blends.

The debate on market manipulation by US oil producers. The Biden Administration investigates possible price manipulation and has urged industry to increase production.

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Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Phone : +1 281-333-2229

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