OPEN APP
Home / Industry / Energy /  US, other countries to tap strategic oil reserves in bid to tame inflation

WASHINGTON : The US and several other countries will tap their national strategic petroleum reserves, senior Biden administration officials said Tuesday, in an attempt to bring down rising gasoline prices that have become a big contributor to inflation.

Other countries participating in the release include China, India, Japan, South Korea and the U.K., the White House said. The U.S. will release 50 million barrels, officials said.

“The president stands ready to take additional action, if needed, and is prepared to use his full authorities working in coordination with the rest of the world to maintain adequate supply as we exit the pandemic," the White House said in a statement.

The coordinated release would be the first one in a decade, when the U.S. and 27 other countries agreed in 2011 to release 60 million barrels to replace some of 140 million in output lost as a result of three months of conflict in what would become Libya’s civil war.

Tuesday’s announcement comes as gasoline and heating-oil prices have risen to their highest levels since 2014. White House officials have spent weeks debating limited options to respond, fearing political damage to President Biden, whose public approval rating has sunk amid inflation fears.

Gasoline prices have risen steadily over the 12 months since Mr. Biden’s election. Pump prices are up 61% from a year ago, with regular unleaded selling last week at an national average price of $3.40 a gallon, according to Energy Department data.

Last week, Mr. Biden called on the Federal Trade Commission to investigate whether oil-and-gas companies are participating in illegal conduct aimed at keeping gasoline prices high. Outside analysts expressed skepticism that the FTC would find enough evidence to substantiate Mr. Biden’s allegations.

This summer, the White House urged the Organization of the Petroleum Exporting Countries to increase output more than they had initially planned, contending that there wasn’t enough oil to meet demand as the global economy rebounds from the Covid-19 pandemic.

In an early November meeting, OPEC and its allied Russia-led producers decided to defy that pressure.

The White House then began exploring other options. The Wall Street Journal reported earlier this month that it had begun discussions with Asian and European countries about tapping their emergency stockpiles at the same time in a coordinated release to put more oil on the market.

The release of 50 million barrels will include 32 million barrels that will be later replaced in the reserve, when prices are expected to be lower, and a sale of 18 million barrels that Congress had previously authorized, senior officials said Tuesday.

There have been only three previous stockpile releases coordinated globally, all when oil or gasoline supplies were disrupted by war in major oil exporting countries or by Hurricane Katrina’s hit on the U.S. Gulf Coast’s oil industry in 2005.

Now, global oil output is about to rise, the International Energy Agency said last week.

President Biden is looking for broad coordination with other countries to make a bigger impact on markets, but his efforts fit in with those of other recent U.S. political leaders of both parties. A boom in U.S. oil production has changed the way U.S. leaders think about the stockpile, and for years now they have looked more aggressively at using it to address various problems.

The Trump administration considered a similar move in 2018—before opting against it. And Congress has authorized several smaller sales in recent years.

Oil prices have plateaued in recent weeks as traders reacted to White House posturing. Since rising to a seven-year high of $84.65 a barrel on Oct. 26, U.S. crude futures are down 9.3%.

The U.S. Strategic Petroleum Reserve holds more than 600 million barrels of oil in four underground storage caverns, salt domes along the Texas and Louisiana coasts. Congress authorized its creation in 1975, in the wake of the Arab oil embargo, as a buffer against supply shocks from oil exporters, but energy markets have changed dramatically in recent years.

Resurgent U.S. oil production from fracking into shale has made political leaders less fearful of shortages and Congress has started draining the reserve as a way to raise cash to pay for tax cuts and other spending. Under congressional authorization, the Energy Department has run seven sales since 2017, unloading more than 60 million barrels, or about 8.6% of what had been in the reserve, according to department figures.

Those sales have been too small to roil energy markets, and analysts said any new release would have to be much larger to have a dramatic impact.

Asked about the impact on prices of a new reserve release, Stephen Nalley, the acting administrator of the U.S. Energy Information Administration, told a Senate committee last week, “Ultimately the amount of impact would be relatively short-lived. It would depend on how much was released."

 

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout