Today, Joe Biden announced an international coordinated action to combat the soaring price hike of crude oil, which is ballasting the economic recovery as COVID-19 pandemic is got in control.
The Department of Energy will make available releases of 50 million barrels of oil from the Strategic Petroleum Reserve to lower prices for Americans and address the mismatch between demand exiting the pandemic and supply.
This release of strategical crude oil reserves will be carried out in parallel with other major energy consuming nations including China, India, Japan, Republic of Korea and the United Kingdom.
The President of the Unite States will 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 countries exit the pandemic.
This is a short term, measure, pointed Biden, as in the long term the strategy of his Goverment is gradually reducing the countries dependence from crude oil through the boos in the development of clean renewable energy sources.
While crude demand is expected to go up and up, even in 2022, pushed by economic recovery and the great rise in other energies prices like that of natural gas, OPEC has decided to keep the pace of slight hikes in producution agreed in its 22nd non OPEC and OPEC Ministerial meeting. Far from matching the 9.2 milion b/d pre-pandemic levels. Russia is following a similar strategy not increasing production.
That’s why the USA, China, India, Japan, Republic of Korea and the United Kingdom have decided to bring their oil reserves to the market to push down prices.
Let’s see how effective Biden’s movement shows in lowering oil crude prices to the pump level specially if OPEC and Russia decide to answer cutting production even over the number crude oil barrels the joint initiative led by US President is meant to release.
Anyway the 23rd OPEC and non-OPEC Ministerial Meeting is in principle scheduled on 2nd December 2021.
The reserves release could not have the desired effect on prices if oil and energy companies pact anticompetitive behaviors, as well.
FTC keeping an eye if fall in prices not translated at the pump by anticompetitive behaviors by companies
Biden action on prices is also focused on how consolidation in the oil and gas sector may be resulting in anti-competitive practices that keep American consumers from benefitting when oil prices fall.
Evidence say that declines in oil prices are not translating into lower prices at the pump. That’s why last week, President Biden asked the Federal Trade Commission to examine what is going on in oil and gas markets and to consider “whether illegal conduct is costing families at the pump.”
50 milion barrels in two tranches
The U.S. Department of Energy will make available releases of 50 million barrels from the Strategic Petroleum Reserve in two ways:
a) 32 million barrels will be an exchange over the next several months, releasing oil that will eventually return to the Strategic Petroleum Reserve in the years ahead. The exchange is a tool matched to today’s specific economic environment, where markets expect future oil prices to be lower than they are today, and helps provide relief to Americans immediately and bridge to that period of expected lower oil prices. The exchange also automatically provides for re-stocking of the Strategic Petroleum Reserve over time to meet future needs.
b) 18 million barrels will be an acceleration into the next several months of a sale of oil that Congress had previously authorized.
Image over the headline.- Caption of the official video where Joe Biden (President of the USA) announced the crude oil reserves release.© The White House.