US President Joe Biden has ordered that up to one million barrels of oil a day be released from the United States’ strategic petroleum reserve as it moves to reduce the impact of rising gas prices amid Russia’s invasion of Ukraine.
The US and other nations have banned the import of Russian oil and gas over the country’s continued invasion of its neighbor, while European countries have promised to wean themselves off Moscow’s energy supplies.
“Today I authorize the release of one million barrels per day for the next six months – more than 180 million barrels,” Biden told White House reporters on Thursday afternoon.
“It is a wartime bridge to increase oil supplies until production increases later this year. And this is by far the largest release from our national reserve in our history. ”
Al Jazeera’s Mike Hanna, who reported before Biden’s news conference from Washington, said the US president is trying to reduce the impact of the Ukraine war on US consumers as the price of gas has risen in the country in recent years.
“It has a huge political impact on President Biden, who is watching the midterm elections later this year,” Hanna said.
“This release of the stock could have the effect of easing gas prices within the United States, of adding to the global stock, of lowering the price of oil, which has skyrocketed in terms of the shortages that have taken place in the aftermath of Russia’s invasion of Ukraine. “
Gradual release
The Biden administration announced in November the release of 50 million barrels from the strategic reserve in cooperation with other countries.
And after the war in Ukraine began at the end of February, the US and 30 other countries agreed to an additional release of 60 million barrels from reserves, with half of the total coming from the US.
The Strategic Petroleum Reserve (SPR) is a complex of four sites with deep underground storage caves created in salt domes along the Texas and Louisiana Gulf coasts, the U.S. Department of Energy said on its website. The reserve currently holds about 586 million barrels.
Helima Croft, head of global commodity strategy at RBC Capital markets in New York, said in a note to clients on Thursday that the Biden administration’s move would be “the single largest SPR release in history”.
The Biden administration has asked other oil-producing countries to increase production, but OPEC + is sticking to its agreed production limits for the time being, Croft said in the note.
“The leadership of the [United Arab Emirates] “Saudi Arabia appears reluctant to take further steps at this stage, as it seeks more full-fledged security guarantees from Washington and has expressed concern about the use of the remaining spare capacity given the uncertainty about the true extent of Russian export disruption,” Croft said.
Effect on prices
Clayton Allen, director at Eurasia Group, said in a separate note to clients that “OPEC’s unwillingness to add volume to the market could limit the price impacts of this release” by the Biden administration.
“Continued geopolitical risk will put upward pressure on prices and SPR volumes will not compensate for the full extent of supply disruptions,” Allen said. “The size and duration of this potential release will put tremendous pressure on SPR infrastructure and the terminals that will be used to move oil to market.”
Robert McNally, president of Rapidan Energy Group, a Washington-based consulting firm, told Al Jazeera that he believed the short-term impact of the release would bring crude oil prices down as much as $ 5 a barrel.
“I do not think it will stop the upward movement in crude oil prices, because the volumes we are talking about from the SPR – even if the Europeans and Japanese throw in barrels tomorrow – are more than neutralized by the risk of disruption that is coming. of Russia, ”he said.
“What they are trying to do here is to reassure the market that there will be at least some compensation for the future loss of Russian supply,” McNally added. “I do not think that means we are going back below $ 100 a barrel.”
Frank Macchiarola, senior vice president of the American Petroleum Institute in Washington, DC, said in an email to Al Jazeera that while the SPR release may offer some relief in the short term, it is not a long-term solution. is in the growing demand for affordable and reliable energy ”.
“Instead of managing from crisis to crisis, we should focus on promoting policies that are completely avoided by increasing production of our country’s domestic energy resources,” he said.
At that point, the White House said in a statement earlier Thursday that Biden was appealing to U.S. lawmakers “to get companies to pay on wells from their leases that they have not used in years and on acres of public land they accumulate. to produce ”.
It said the industry sits on more than 12 million acres (4.85 million acres) of federal land with 9,000 permits, and will “have to choose whether to start producing or pay a fee for each vacant well and unused acre” .
But environmentalists and others have warned that the war in Ukraine should not be used as a pretext to increase production to shift Russian energy supplies – and exacerbate the climate crisis. Instead, they urge nations to move to more renewable forms of energy.
