A number of major economies are using strategic oil reserves to keep high gasoline prices down. For example, they hope to fuel the rebounding economy after the acute corona crisis, now that the oil-producing countries of OPEC and Russia are deliberately keeping their production low.
US President Joe Biden announced Tuesday that he will release 50 million barrels (about 8 billion liters) of crude oil from the emergency stockpile. He added that this step is being taken in coordination with China, South Korea, India and the United Kingdom, among others. India announced that it will bring 5 million barrels to the market. South Korea and Japan have announced their intention to participate at the request of the United States.
The decision cannot be viewed in isolation from the futile efforts of recent months to persuade OPEC and Russia to rapidly increase their production. In the last meeting of this so-called OPEC+, in early November, these countries announced that they only want to increase production slowly.
High energy prices have pushed up inflation worldwide. In the US, prices have increased by an average of 6.2 percent between October 2020 and last month. Oil prices are by far the biggest factor in this. from US Department of Employment figures shows that energy costs have increased by 30 percent in the past year, food prices by 5.3 percent.
In a statement, the White House underlined international cooperation brought about through “diplomatic efforts.” Biden spoke with President Xi of China earlier this month. The White House said “weeks of consultation” preceded Tuesday’s decision. “And we are already seeing the effects of these efforts in oil prices. Over the past few weeks, as news of these talks came out, oil prices have fallen nearly 10 percent.”
Also read: ‘Green’ Biden is stuck due to high petrol prices
The market’s reaction Monday, when the news was leaked, and Tuesday will not have immediately reassured the White House. Crude oil prices rose slightly. news agency Reuters quoted economists and analysts who were generally not very impressed with the measure. “Mainly symbolism,” said one of them. Others suggested that this raised fist could actually encourage OPEC countries and Russia to cut production, thus negating the effect of the oil injection from strategic stocks.
Of the 50 million barrels of US oil, the traders who buy them have to promise to return 32 million of it to strategic stock within a few years. This already shows that President Biden is mainly concerned with a temporary relief in prices. In the US, where elections to Congress will be held next year, inflation is an acute concern for the president and his Democratic Party. A Republican senator recently said in The Wall Street Journal that the inflation politically “a gold mine” for the Republican Party.
A version of this article also appeared in NRC in the morning of November 24, 2021
#oil #reserve #prices