Biden to tap into U.S. oil reserves to fight rising gas prices

The United States and five other world powers on Tuesday announced a coordinated effort to dip into their national oil stocks, trying to...

The United States and five other world powers on Tuesday announced a coordinated effort to dip into their national oil stocks, trying to push down gas prices that have angered consumers around the world.

The move appeared to disappoint oil traders, who expected President Biden to announce a larger release of America’s strategic oil reserve, which is the world’s largest at 620 million barrels. The price of a barrel of crude oil actually rose after the announcement in world trade, although administration officials said prices could drop in the coming weeks.

The market reaction highlighted the challenges Mr. Biden faces, both politically and economically, in his efforts to respond to the fastest rise in U.S. inflation in three decades. The president has seen his approval ratings plummet as gas and food prices soar, while Republicans have launched a steady series of attacks blaming Democrats.

Mr Biden has changed his post on the matter in recent weeks, hoping to show consumers he understands their financial difficulties. At the White House on Tuesday, he presented the release of oil from the strategic reserve as an important step towards reducing fuel costs for drivers at the start of the vacation travel season.

“Today we are launching a major effort to bring the price of oil down, an effort that will cover the entire world and eventually reach your local gas station, God willing,” Biden said.

“While our combined actions will not solve the problem of high gas prices overnight, they will make a difference,” he said. “It will take a while, but before long you should see gas prices drop where you fill up.”

Earlier on Tuesday, administration officials said Mr Biden had ordered the Department of Energy to mine 50 million barrels of crude in the Strategic oil reserve. Traders expected 100 million barrels, said Richard Bronze, head of geopolitics at Energy Aspects, a market research firm in London.

Britain has said it will allow the release of up to 1.5 million barrels and India has said it will release five million. Mr Bronze estimated that Japan and South Korea would each add four to five million barrels. China has not announced details of its plans.

The concerted effort, the largest ever to release strategic reserves in several countries, is aimed at dealing with fluctuations in oil supply and demand, administration officials said. And it was a blow through the bow of OPEC Plus, the name of the Organization of the Petroleum Exporting Countries as well as Russia and other countries. Mr Biden pushed these countries to increase their production, but was pushed back.

This decision could provide a response next week when the group holds its monthly meeting. While this may prompt these countries to increase their production, it could just as easily cause the cartel to restrict supply further and push up world prices.

In recent monthly meetings, OPEC Plus has stuck to plans to increase production by a relatively modest amount of 400,000 barrels per day each month. US officials dodged a question about possible OPEC Plus retaliation. Officials said they had been pushing oil producers to announce their own supply increases for weeks, and made it clear to those countries that Mr Biden and other world leaders were considering their own emergency releases. They said Mr Biden would have preferred a parallel publication that included more oil-producing countries.

The price of oil has fallen since late October, in part in anticipation that countries would take action to try to contain energy costs. The US benchmark, West Texas Intermediate, immediately jumped after the administration’s announcement and was trading up 1.3 percent for the day. So far this month, the price had fallen 4.75%.

Demand for oil fell precipitously in the first months of the pandemic, causing oil-producing countries to cut production. In the United States, the drop in demand led to a substantial drop in drilling; the number of active oil platforms in the country fell by almost 70% in the summer of 2020.

As prices have risen in recent months, Mr Biden has looked for ways to show he is trying to tame prices, including ask the Federal Trade Commission investigate possible illegal behavior of major oil companies in the domestic gasoline market. President urged oil producers to increase supply even as he urges the United States and other countries weaning off fossil fuels in the long term to avoid catastrophic global warming.

On Tuesday, Mr Biden said his environmental program was not contributing to recent price increases at the pump.

“My effort to fight climate change is not to increase the price of gas,” he said.

The emergency stock that Mr Biden has tapped is stored in underground caverns in Texas and Louisiana. It was established after the 1973-74 oil embargo by Arab members of the Organization of the Petroleum Exporting Countries, and has been operated in emergencies such as the build-up of the Persian Gulf War in 1991 and the aftermath of Hurricane Katrina in 2005, when much of the oil infrastructure in the Gulf of Mexico was damaged. The reserve is also used to trade or lend oil to refineries when accidents or storms block shipping channels.

Most experts believe that a press release could eventually bring prices down slightly, but only for a short time, as oil prices are set globally and global consumption averages around 100 million barrels. per day. The average price of a gallon of regular gasoline in the United States rose to $ 3.40 on Tuesday, from $ 2.11 a year ago, according to AAA, the travel services organization. But gas prices started to stabilize last week.

Several recent presidents have ordered the release of US strategic reserves, including Mr. Bush; his father, George HW Bush; Bill Clinton; and Barack Obama.

But research suggests that the effect on gas prices, for the most part, is modest at best – underscoring how gas prices are largely outside of a president’s control.

The Obama administration led the most recent coordinated global release of oil reserves in June 2011, when the United States and 27 other countries have freed 60 million barrels of reserves to replace Libya’s lost production which was interrupted by political unrest in the North African country. Of the total amount of oil released, about half came from reserves in the United States, with the rest of the other 27 industrialized countries belonging to the International Energy Agency.

Officials in the Biden administration said the coordinated effort announced on Tuesday would be in two parts: a 32 million barrels loan over several months to refineries and the accelerated sale of 18 million barrels, which has already been authorized by the Congress.

Britain will allow companies to voluntarily release their oil reserves. If each company takes advantage of the option, it would be 1.5 million barrels, a UK government official said.

Helima Croft, head of global commodities at RBC Capital Markets, an investment bank, said OPEC Plus may choose to respond at its next meeting on December 2.

“If OPEC wants to filibuster, it can mitigate the impact” of the oil release, she said, by not approving the next monthly production increase of 400,000 barrels per day when Of the reunion.

On the flip side, she added, it would “expose them to a lot of problems in Washington,” including potentially a congressional antitrust bill targeting OPEC, known as NOPEC, which could call to tackle the financial reserves of countries like Saudi Arabia and the United Arab Emirates. “I think it would be a nuclear option and OPEC will not want to go down that road,” she said.

Robert McNally, chairman of Rapidan Energy Group, a market research firm and former White House energy adviser to George W. Bush, said Tuesday’s announcement “may be politically smart, but I don’t think so. that she be smart in terms of politics and likely backfire.

“There’s a good chance OPEC Plus will make up for that, and they have a bigger fire hose than us,” he said. “To use strategic actions to defend a level of oil price fixed on a world market is pure madness. “

Republicans, including Representative Kevin McCarthy of California, the House minority leader, criticized Biden and blamed the White House for the inflation.

In a tweet, Mr McCarthy said the decision to mine America’s strategic reserves “is a crass political ploy just 3 days before Thanksgiving.”

Democrats in Congress, including Senate Majority Leader Chuck Schumer, recently called on Biden to take action to bring immediate relief to Americans.

Energy Secretary Jennifer M. Granholm on Tuesday warned of an immediate and dramatic drop in gas prices. When asked when Americans might see prices drop, Ms Granholm made no promises: “It won’t be tomorrow,” she said.

Eshe nelson and Clifford krauss contributed reports.

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Newsrust - US Top News: Biden to tap into U.S. oil reserves to fight rising gas prices
Biden to tap into U.S. oil reserves to fight rising gas prices
Newsrust - US Top News
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