The Biden government asked some of the largest oil-consuming countries of the world – including Japan, China, and India – to consider releasing crude oil stockpiles in an organized effort to lower worldwide energy prices. The strange request comes as the United States President Joe Biden faces political pressure over mounting pump prices and other consumer costs because of the bounce back in economic activity across the country from lows plumbed early in the COVID-19 pandemic.
It also reflects American frustration with members of the Organization of the Petroleum Exporting Countries (OPEC) and its partners. They rejected frequent requests from the U.S. to boost up their production. One of the sources familiar with the matter said that the U.S. is talking about the symbolism of the world’s largest consumers sending a message to OPEC that you got to change your behavior regarding oil production and supplies.
China said it is working on oil price extended declines, on a crude release provoked by the United States request, after settling on Wednesday further less than 7-year highs struck in early last month. Biden, along with his leading aides, discussed the probability of a coordinated release of stockpiled oil with allies including India, Japan, and South Korea, along with China, over the last few weeks.
China is Working on Release of Crude Oil Reserves
In addition, the United States and allies brought together strategic petroleum reserves releases before, such as in 2011 during a war in Libya, a member country of OPEC. However, the recent proposal signifies an unprecedented challenge to OPEC, the alliance that influenced oil prices for over five decades, because it involves China. An industry ministry of Japan said the U.S. requested the cooperation of Tokyo in dealing with higher oil prices. Still, he couldn’t confirm whether the American request included coordinated releases of crude stockpiles. The official said that Japan couldn’t use reserve releases by law to lower prices.
The state reserve bureau of China said that it was working on a release of oil reserves though it declined to give remarks on the Biden government’s request. A South Korean official also confirmed that the U.S. asked Seoul to release some oil reserves. Furthermore, the official added that the Korean government is reviewing the American request; however, they can’t release crude oil reserves because of surging oil prices. However, he said that Seoul could only release oil reserves in supply imbalance instead of responding to rising oil prices.
According to a United States source who participated in the discussions, the United States’ share of any possible release of reserves would require over twenty million to thirty million barrels to affect markets. Such a stock release could be in the form of a loan or sale from the United States Strategic Petroleum Reserve or both. The Strategic Petroleum Reserve was set up in the 1970s after establishing the Arab Oil Embargo to ensure the U.S. had enough crude supply to weather an emergency.
U.S. Crude Oil in Strategic Petroleum Reserves
The Biden government asked some top oil-consuming countries to consider releasing crude oil stockpiles in a coordinated offer to lower international energy prices. Moreover, the United States holds the world’s largest crude oil reserves.
Many people knowing the matter cautioned that talks over a coordinated supply release have not been finalized nor had any ultimate decision made about whether to pursue any particular course of action on oil prices. However, the White House denied commenting on the conversations’ detailed content with other nations. OPEC and other oil-producing countries, including Russia, have added four hundred thousand barrels per day to the market monthly. But they collectively resisted the requests of Biden for additional increases with their argument that the rebound in demand could be fragile.