Oil rises despite release of US strategic reserves
White House coordinates with China and others to reduce energy prices
Oil futures rose starkly on Tuesday, despite the US government’s attempt to tackle high prices by tapping strategic reserves.
Tuesday saw President Joe Biden authorise the release of 50 million barrels of oil from the nation’s Strategic Petroleum Reserve.
The release comes in the form of a loan and a sale to companies, with 32 million additional barrels being loaned in the coming months in addition to the 18 million barrels in sales which Congress has already approved.
For months, criticism has been levelled at the Biden administration for the rising cost of energy.
Although it stressed the success of America’s post-Covid economic recovery, the White House admitted on Tuesday that: “American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand as the global economy emerges from the pandemic.”
It added: “That’s why President Biden is using every tool available to him to work to lower prices and address the lack of supply.”
Collaboration with non-OPEC+ nations
The move comes in conjunction with the governments of India, Japan, South Korea, the United Kingdom and China, all of whom unloaded oil reserves onto the global market.
In an attempt to tackle rising energy prices on its own, earlier in the autumn, the government of China released oil from its strategic reserves for the first time on record. The attempt by America’s largest trading partner and geopolitical rival proved unsuccessful, however.
The unusual coordination of US and Chinese governments follows on from last week’s virtual meeting between Biden and President Xi Jinping, in which “the importance of taking measures to address global energy supplies” was discussed.
The US and China could be argued to have been pushed into each other’s arms by OPEC+, the Organisation of the Petroleum Exporting Countries and its allies, including Russia.
OPEC+ has steadfastly refused to accelerate its schedule for easing coronavirus-era oil production limits, despite the exhortations of leaders such as President Biden.
“Controlled by a cartel”
At the start of the month, US energy secretary Jennifer Granholm laughed when asked in an interview whether the US planned to tackle rising energy costs by increasing oil production.
Granholm stated: “As you know, of course, oil is a global market. It is controlled by a cartel. That cartel is called OPEC, and they made a decision yesterday that they were not going to increase beyond what they were already planning.”
On Tuesday, Granholm argued that the release of strategic reserves underscored President Biden’s “commitment to using the tools available to lower costs for families and continue our economic recovery”.
By UK late afternoon, spot Brent and US crude traded up by 2% and 1.8% at $80.71 and $77.97 per barrel, respectively.