Fighting gas prices, US to release 50 million barrels of oil

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President Joe Biden is ordering the release of a record 50 million barrels of oil from America’s strategic reserves to help reduce energy costs

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WASHINGTON – President Joe Biden on Tuesday ordered the release of a record 50 million barrels of oil from the US strategic reserve, aimed at slashing gasoline and other costs, in coordination with other major energy-consuming countries, including India, the United Kingdom and China. Gave.

The US action is focused on helping Americans deal with high fuel and other prices ahead of Thanksgiving and winter holiday travel. According to the American Automobile Association, gasoline prices are around $3.40 per gallon, up 50% from a year ago.

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“While our joint actions won’t solve the problem of high gas prices overnight, it will make a difference,” Biden promised in remarks at the White House. “It will take time, but before long you should look at the price of gas where you fill your tank.”

The government will start taking barrels to the market by mid-December. Gasoline typically reacts intermittently to changes in oil prices, and administration officials suggested this is one of several steps toward ultimately reducing costs.

Oil prices tumbled in the days before the announced withdrawal, a sign that investors were anticipating moves that could bring a combined 70 million to 80 million barrels of oil into global markets. But after this announcement, instead of a fall in the prices in trading, there was a rise of about 2 per cent.

Claudio Gallimberti, senior vice president of oil markets at Rystad Energy, said the market was expecting the news, and traders may have been overwhelmed when they saw the details.

“The problem is that everybody knows this measure is temporary,” Gallimberti said. “So once it’s stopped, then if demand is still above supply, you’re back to square one.”

Shortly after the US announcement, India said it would release 5 million barrels from its strategic stockpile. The British government confirmed that it would release up to 1.5 million barrels from its reserves. Japan and South Korea are also participating, and US officials said this is the largest coordinated release from the global strategic stockpile.

British Prime Minister Boris Johnson’s spokesman Max Blaine said it was “a sensible and measured move to support global markets” during the recovery of the pandemic. Blaine said companies in the country would be authorized but not obliged to participate in the release.

Despite all the optimistic statements, the actions of the US and others carry the risk of counter moves by Gulf countries, particularly Saudi Arabia and Russia. Saudi Arabia and other Gulf countries have made it clear that they intend to control supply for the time being to keep prices high.

As the joint release coming from US and other countries’ stockpiles spread in recent days, OPEC’s interests were warned that those countries could respond in return if they promised to increase supplies in the coming months.

Wyoming Senator John Barrasso was among Republicans who criticized Biden’s announcement. 3 Senate Republicans said the underlying issue is restrictions on domestic production by the administration.

“Begging OPEC and Russia to increase production and now using Strategic Petroleum Reserves are desperate attempts to avert a Biden-caused disaster,” Barrasso said. “They are not a substitute for American energy production.”

Biden scrambled to reshape much of his economic agenda around the issue of inflation, saying his recently passed $1 trillion infrastructure package would make it more efficient and cheaper to transport goods. Will ease price pressure.

Republican lawmakers have slammed the administration for pushing inflation to a 31-year high in October. The Consumer Price Index has risen 6.2% from a year earlier – the biggest 12-month jump since 1990.

The Strategic Petroleum Reserve is an emergency reserve to maintain access to oil in case of natural disasters, national security issues, and other events. Maintained by the Department of Energy, the reserves are stored in caves formed in salt domes along the Texas and Louisiana Gulf Coasts. The reserve holds about 605 million barrels of petroleum.

It’s the right tool to help ease the supply problem, the Biden administration argues. According to the Energy Information Administration, Americans used an average of 20.7 million barrels a day during September. This means that the release equates to an additional supply of about two and a half days.

“Right now, I will do what needs to be done to lower the price you pay at the pump,” Biden said at the White House.

He said the administration is also looking at potential price hikes by gas companies squeezing customers while making money from lower oil costs. Energy Secretary Jennifer Granholm also said US companies are part of the problem, keeping production below pandemic levels to boost profits.

The coronavirus pandemic rocked energy markets everywhere. As it bore and economic activity plunged in April last year, energy demand fell and oil futures prices turned negative. Energy traders didn’t want to be stuck with crude they couldn’t store. But as the economy recovered, production lagged and prices hit a seven-year high in October.

US production has not improved. Data from the Energy Information Administration indicated that domestic production averaged about 11 million barrels per day, up from 12.8 million before the pandemic.

Americans are feeling the pressure. Matt Hebbard of Agoura Hills, Calif., is taking $80 to gas his SUV. “Gas prices are definitely on everyone’s mind right now,” he said while filling in at a station in his suburb northwest of Los Angeles.

He expressed hope that the long-term impact of this step of the President will be good.

Meanwhile, Sea Amber was on her way to Las Vegas from her California home. Saddened by spending more money filling up his car, he said he didn’t expect Biden’s action to work and didn’t agree with him.

“I’m not happy with my president,” he said.

Republicans in Congress are pointing to Biden’s efforts to reduce drilling and support renewable energy as the reason for the low production, although there are several market dynamics at play as fossil fuel prices remain high around the world.

Biden and administration officials insist that exploiting excess oil from reserves does not conflict with their climate goals, because this short-term fix serves a specific problem, while climate policies have been a long-term answer for decades.

He argues that the administration’s push to promote renewable energy will ultimately mean less reliance on fossil fuels in the US. But it’s a politically convenient argument—in simple terms, higher prices reduce use, and higher gasoline prices could force Americans to become less reliant on fossil fuels.

The White House’s decision comes after weeks of diplomatic talks. According to the White House, Biden and Chinese President Xi Jinping in their virtual meeting earlier this month took steps to counter tightening petroleum supplies and “discussed the importance of measures to address the global energy supply”.

The Department of Energy will provide oil from the Strategic Petroleum Reserve in two ways; The White House said 32 million barrels would be released over the next few months and returned to reserves in the coming years. The additional 18 million barrels would be part of the oil sale that Congress had authorized.

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writers Kathy Busevitz and Charles Sheehan contributed from New York, Jill Lawless from London and Matthew Daly and Ellen Nickmeyer from Washington.

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