The US government announced on the 23rd that it would unite with a number of major oil consuming countries to release crude oil reserves in order to cool oil prices, but international oil prices did not fall but rose instead.
As of the close of the day, the price of light crude oil futures for delivery in January 2022 on the New York Mercantile Exchange rose 1.75 US dollars to close at 78.50 US dollars per barrel, an increase of 2.28%. The price of London Brent crude oil futures for delivery in January 2022 rose by 2.61 US dollars to close at 82.31 US dollars per barrel, an increase of 3.27%.
Recently, the price of gasoline in the United States has risen to a seven-year high, and domestic calls for the release of strategic oil reserves to stabilize oil prices have continued to rise. The White House announced on the 23rd that the US Department of Energy will release 50 million barrels of crude oil from the Strategic Petroleum Reserve to alleviate the mismatch between oil supply and demand and reduce oil prices when the economy recovers from the new crown epidemic.
On November 23, U.S. President Biden announced that he ordered the use of the U.S. Strategic Petroleum Reserve (SPR), and the Department of Energy would release 50 million barrels of oil to the market within a few weeks to curb rising oil prices. According to reports, the price of oil per gallon in the United States may drop by 5 to 15 cents in the next few days or weeks.
The US Department of Energy stated that the 50 million barrels of crude oil will be put on the market as early as mid-to-late December this year, of which 18 million barrels have been approved by Congress and will be sold directly, and the other 32 million barrels are short-term exchanges. They will be agreed in 2022 when the oil price stabilizes. Return the strategic oil reserve by 2024.
However, Biden’s plan has also raised some doubts, believing that using SPR to reduce oil prices is a performance of raising its voter support rate and may not have a long-term effect on quelling oil price increases. In addition, this move has increased the differences between the White House and the oil companies. Oil companies believe that the only way to keep oil prices low for a long time is to rely on stable market supply from oil companies. Foreign media said that Biden tried his best to reshape the government’s economic agenda around inflation, but still needs to continue to pay attention to tariffs in order to more effectively reduce people’s cost of living.
Oil prices soar to a 7-year high
Experts questioned whether SPR was used for political purposes
As the global economy gradually recovers from the impact of the epidemic, the demand for oil has increased rapidly. The production and supply of oil failed to keep up in time, and global oil prices rose rapidly. Recently, the national average gasoline price has risen by 50% from a year ago, setting a new high in seven years. According to data from the American Automobile Association, as of the 23rd, the average gasoline price in the United States was $3.403 per gallon. Some experts predict that the Biden administration can use SPR to reduce the price of oil per gallon by 5 to 15 cents in the coming days or weeks at the latest.
“This action will help us solve the problem of insufficient supply and thus help ease prices,” Biden said. “It will take some time, but it will not take long for gasoline prices to drop.” But the US fuel price tracking website GasBuddy Patrick De Haan, the head of oil price analysis of China, questioned this, “I am not sure whether the national average gasoline price will fall as Biden expected.”
According to De Haan, calling SPR will not relieve the long-term pressure on the oil market. OPEC, the Organization of the Petroleum Exporting Countries, has previously rejected the United States‘ call for an increase in global oil production. “The use of SPR by the United States may cause them to reduce oil production again.” De Haan said that if OPEC decides to limit future oil production, this will be enough to offset the oil reserves released by the United States and other countries.
After OPEC+, which includes major oil-producing countries such as Saudi Arabia and Russia, rejected the U.S. call for increasing oil production, the Secretary-General of the International Energy Forum McMonigal stated in a statement on November 22 that if oil importing countries begin to release crude oil Reserve, OPEC+ may not increase crude oil output.
On the other hand, reports said that the White House’s move seemed more like a political purpose, because soaring oil prices have been seen as hurting Biden’s popular support. “We have never used strategic oil reserves just to reduce prices. This is very political,” De Haan said.
According to De Haan, SPR has historically been used to deal with oil supply interruptions caused by emergencies, such as natural disasters, wars and other emergencies.
Shale gas investment slows
The White House needs to face up to differences with oil companies
In recent years, the development of shale gas extraction technology in the United States has brought its oil production close to that of Saudi Arabia and Russia, reducing the United States’ dependence on oil imports. The United States is the world‘s largest oil strategic reserve country. Since the establishment of the strategic oil reserve in 1975, it currently has more than 600 million barrels of reserves.
But reports say that the differences between American oil companies and the White House are widening. When Biden announced this plan, shale gas producers were putting the brakes on reinvestment, and the rate at which producers used operating funds for oil and natural gas drilling fell to an all-time low in the last quarter.
“The use of SPR, strictly speaking, is like a (short-term) bandage for wounds. The only way to keep oil prices low in the long-term is to encourage oil companies to drill in North America (increasing global oil production) while the government creates a sustainable economy. Regulatory environment.” said Paul Moswold, president of Scandrill, a drilling industry operator. The American Petroleum Institute also blamed Biden’s refusal to build new oil pipelines and suspended the lease of federal land for its reluctance to increase oil investment.
Last week, Biden called on federal regulators to investigate whether oil and gas companies did not have “illegal” bidding. White House Press Secretary Jane Pusa said on the evening of the 22nd that the White House will pay close attention to oil companies. “We will continue to pressure oil companies with record profits to monitor their intentional price hikes.”
Reduce the cost of living of American consumers
Can’t just lower oil prices
According to foreign media, Biden has tried his best to reshape most of the economic agenda around the issue of inflation, and has taken a variety of measures to respond to the soaring inflation: investigating oil prices, infrastructure plans to alleviate supply chain crises, and expanding welfare expenditures. None of these seem to make American consumers feel immediately relieved, and the Biden administration has been ignoring the pressure on American businesses and families that the tariff issue has brought to life.
According to a report by the US “Capitol Hill” on the 22nd, Biden is suffering from his “almost uncontrollable inflation problem” and its threat is growing. In October, the US inflation rate reached its highest value in more than 30 years. A poll published by CBS on the 21st showed that 82% of Americans found that the goods they often buy were “more expensive than before”, and 67% of Americans disagreed with the Biden administration’s handling of the inflation problem. (33%), and only 30% of Americans believe that the current economic situation is good.
According to reports, former US President Trump decided to impose a 25% tariff on Chinese goods exported to the United States in order to revive the US manufacturing industry. But not only failed to achieve the goal, US importers lost 110 billion U.S. dollars in 2020, and American households lost an average of 1,300 U.S. dollars. So far, Biden has only relaxed tariffs on European steel and aluminum. But it has not touched on the more important U.S. taxes on imports of Chinese consumer goods and intermediate products. Richard Haas, the current chairman of the US Foreign Relations Committee, said that on this issue, political considerations are more important than the inflationary impact of tariffs.
Chengdu Commercial Daily-Red Star News reporter Wang Yalin, intern reporter Ding Wenzhuang Xinhua News AgencyReturn to Sohu to see more
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