So far nothing has worked. Gasoline prices continue to rise even as the cost of production falls, and the Biden administration is scrambling to save face. Finally, this week, Biden threw in the towel and authorized the opening of strategic oil reserves that it fought so hard to avoid, but it also involves the main Asian economic and geopolitical powers.
“Today, the President announces that the Department of Energy will make 50 million barrels of oil available from the Strategic Petroleum Reserve to lower prices for Americans and address the mismatch between demand for output of the pandemic and the supply, ”he added. The White House said on Tuesday. 32 million of those barrels will be part of a swap – although they are being mined now as an emergency relief measure, they will be returned in full to strategic oil reserves over the next few years when oil prices are expected to rise. stabilize.
Biden has been extremely reluctant to compromise America’s energy security in any way, but he has relied heavily on his most valuable skills – international relations and complex diplomatic negotiations – to soften the blow and level the playing field. Game.
“Due to President Biden’s leadership and our diplomatic efforts, this publication will be taken in conjunction with other major energy consuming countries, including China, India, Japan, the Republic of Korea and the United Kingdom. United, ”continued the White House. “This results in weeks of consultations with countries around the world, and we are already seeing the effect of this work on oil prices. In recent weeks, as reports of the work became public, oil prices have fallen by nearly 10 percent. ”
The coordinated announcements from China, India, Japan, South Korea, and the UK all referred to the need to control global oil markets and an imperative for international cooperation (notwithstanding all nations of the world). OPEC +) to do so. Biden has already been mocked for his decision which does not guarantee any significant relief from the shock of stickers to gas pumps and which, moreover, seems contradictory or even hypocritical in the context of the climate commitments of COP26 this month.
China, which is generally top secret and protective of its unknown quantities of reserved oil (which would be around 37.7 million tonnes in 2017), will release an – you guessed it – an undisclosed amount of oil. China, which historically bases all of its energy decisions on energy security and independence, clearly sees a release of its coveted reserves as a fair compromise for a strong, albeit nascent, alliance against OPEC.
Japan, for its part, had 388 million barrels of total strategic crude oil stocks as of June 2020, and will also release an unspecified amount in the “hundreds of thousands of kiloliters of crude oil” in a move that “marks a extraordinary moment. for a resource-poor Japan ”, according to reports from the Japan Times. Japan, which has strict laws imposing certain levels of oil storage, sees such a release as a last resort. There have only been five such releases in the country’s history, after emergencies such as the Gulf War and the devastation of 2011 earthquake and tsunami.
India, which is an energy-strapped nation under the best of circumstances, has also agreed to release 5 million barrels. The Indian government directly designates OPEC as the reason for its cooperation in the coordinated liberation, quoting “Concern about the oil supply artificially adjusted below demand levels by oil-producing countries”.
The real impact of this release of oil on world markets remains to be seen. Oil producers fear that increased oil supplies could lead to a crash in the near future. But it seems clear that Biden and his Coordinated Liberation Alliance seem willing to take that risk in return for some geopolitical leverage against OPEC +.
By Haley Zaremba for OilUSD
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