On Tuesday, the President of the United States ordered a record fifty million barrels of oil released from the strategic reserve of America, seeking to bring down gasoline costs and other prices, in collaboration with other main energy-consuming countries, including China, the United Kingdom, and India. According to the American Automobile Association, the American move focused on helping the nationals cope with higher energy and other prices, over fifty percent higher than one year ago. Previously, Biden asked other countries to release their oil reserves to combat higher prices
During his remarks at the White House, Joe Biden vowed while joint actions of the governments will not solve the issues regarding high gas prices overnight, it will make a difference. Of course, it requires some time, but before long, Americans should see the price of gas drop. The Biden administration will start to move barrels into the market in mid-to-late December. In addition, petroleum responds at a lag to changes in gasoline prices, and government officials suggested this is one of many steps toward finally bringing down prices.
Today I’m announcing action to lower the cost of gas and oil for American families.
The Department of Energy will make available releases of 50 million barrels of oil from the Strategic Petroleum Reserve to lower gas and oil prices for Americans.
— President Biden (@POTUS) November 23, 2021
What is the response of other countries after the Biden announcement?
Oil prices fell in the days before announced withdrawals, indicating that investors were forestalling the move that could bring a collective seventy million to eighty million barrels of oil onto the worldwide markets. However, in trading after the Biden announcement, costs shot up approximately two percent instead of falling. Senior U.S. vice president for oil markets at Rystad Energy, Claudio Galimberti, said that the issue is that everyone knows that this move is temporary. So, once it stops, if oil demand continues to be above supply, such as it is right now, you are back to square one.
Shortly after the release announcement of the U.S. president, India said that it would release five million barrels from its stockpile. The United Kingdom government also confirmed that it would release up to 1.5 million barrels of oil from its strategic reserves. South Korea and Japan also assured their participation in the move, and United States officials expressed that it is the most significant coordinated release from international strategic oil reserves.
Max Blain, the spokesperson of British Prime Minister Boris Johnson, said that it was a sensible move to boost international markets during the COVID-19 pandemic recovery. He added that they will authorize the energy companies of the U.S. but will not compel them to participate in the release. Despite all the positive statements, the moves by the United States and other countries risk counter moves by Gulf countries, especially Russia and Saudi Arabia. KSA and other Gulf nations made clear they aim to control oil supply to keep prices high for the time being.
Biden Faced Criticism on his Announcement
Wyoming Senator John Barrasso was among Republican leaders who slammed the announcement of the U.S. president. The number three Senate Republican said the primary issue is restrictions on local production by the government. He noted that begging Russia and OPEC countries to increase oil production and now using the stockpiles are desperate tries to handle a Biden-created disaster. Further, he added that they are substitutes for U.S. energy production.
Joe Biden pushed to reshape much of his government’s economic plan over the issue of inflation, saying that the recently approved $1 trillion bipartisan infrastructure package will reduce price pressures by making it cheaper and more efficient to transport goods. Republican representatives hammered the government for inflation, hitting a thirty-one-year high in October; the consumer price index in the U.S. rose 6.2 percent from one year ago – the most considerable twelve-month increase since 1990.
The U.S. Strategic Petroleum Reserve is an emergency stockpile to preserve access to oil in case of national security issues, natural disasters, and other events. The Energy Department maintained the reserves and stored them in caverns made in salt domes along with Louisiana and Texas Gulf Coasts. Furthermore, there are approximately six hundred and five million barrels of gasoline in reserve.
Republican leaders in Congress are pointing to the efforts of the president to reduce drilling and boost renewable energy as a reason for the fallen production. However, they are various market dynamics at play as fossil fuel prices are higher across the world. Biden and his government officials insist that tapping more oil reserves doesn’t conflict with his climate targets. They argue that it is a short-term fix to combat a specific problem, while climate policies are long-term plans for coming decades.
Biden Administration Defended the Decision
The Biden government defended its decision to release fifty million barrels of petroleum stockpiles and argues that it is the right tool to help combat the supply issues. According to the Energy Information Administration, American nationals used an average of 20.7 million barrels of oil per day during September. That means that the reserve release equals around two and a half days of supplementary supply.
At the White House, Biden said that he would do as per the demand and requirement to reduce the price Americans pay at the gas stations. In addition, he said the government is looking into possible price overcharging by petroleum companies embracing customers while making money off the decreased oil costs. Jennifer Granholm, the Energy Secretary, said that American companies are part of the issue, keeping manufacturing below pre-pandemic levels to raise profits.
The COVID-19 pandemic shook energy markets across the world. As the outbreak bore down and economic activity sank in April of 2020, oil futures prices turned negative, and energy demand collapsed. Energy traders didn’t want to get stuck with crude oil that they couldn’t store. However, as the country’s economy recovered after the vaccination roll-out, production lagged, and prices rose to a seven-year high in October.
Still, American production has not recovered completely. According to the Energy Information Administration statistics, domestic production averages approximately eleven million barrels per day, down from around 12.8 million before the coronavirus pandemic. Moreover, the decision from the White House came after some weeks of diplomatic dialog. President Biden and his Chinese counterpart Xi Jinping negotiated over moves to count tight gasoline supplies and discussed the importance of tackling global energy supplies.