The US government is considering releasing up to 180 million barrels of oil from its emergency supply, people who know this problem told Reuters, in an effort to despair to reduce high fuel prices and curb inflation.
If the White House follows up with this plan, it will represent the biggest release of the Strategic Oil Reserve (SPR) in history for almost 50 years and mark the third time in the last six months that the US government has utilized its emergency inventory. 180 million barrels of oil are reported to be accessed equivalent to about two days of global demand, according to Reuters, and will be withdrawn from a gradual in a few months, with several sources saying that the plan is to utilize as many as 1 million barrels of oil per day.
President Joe Biden is expected to confirm this plan at 13:30 at night. Eastern time, when the White House made it scheduled to discuss “the actions of the government to reduce the impact of the increase in Putin prices on the price of energy and lower gas prices in pumps for American families.”
The intention of President Biden was revealed the day before the member countries of the International Energy Agency (IEA) would meet to discuss and decide the release of collective oil aimed at cooling global crude oil prices which reached the highest 14 years in March after Russia invaded Ukraine and immediately before the state organization -The Petroleum Exporting State (OPEC) refuses to comply with demand from the West to significantly increase supply.
Oil Prices Fall Sharply, but OPEC Refuses to Play Ball
News of Biden’s impending announcement pushed oil prices down. When markets opened in the U.S., West Texas Intermediate (WTI) and Brent crude were both down roughly 5% to about $102 and $108 per barrel, respectively.
Goldman Sachs, in a research note sent to its clients, claimed that releasing 180 million barrels over six months would help the market rebalance this year but not resolve the structural supply deficit caused by cutting Russia out of the picture.
Oil prices have rocketed since Vladimir Putin ordered his country to invade Ukraine in late February and governments around the world responded by hitting Russia, the second biggest exporter of oil, with hefty sanctions. Subsequent supply concerns drove Brent crude futures up to about $139 per barrel earlier in March, the highest level since 2008.
Other than drawing more barrels from its own reserves and counting on IEA members to follow suit, the U.S. has been trying to convince Saudi Arabia, the biggest oil exporter in the world, and other big OPEC producers to sharply ramp up supplies and take the heat out of prices. However, OPEC has been refusing to budge, confirming that it will increase supply by a modest 432,000 barrels per day in May and not by more.
Consistently High Oil Prices Could Lead to a Recession
President Biden is desperate to lower fuel prices as it has contributed to high inflation and hurt his administration’s approval rating ahead of the midterm elections in November. High oil prices harm Americans in many ways, affecting, among other things, driving costs and the amount paid to heat homes.