The joint initiative, presented as unprecedented by the US government, seeks to increase supply so that prices fall. American reserves are the world’s largest emergency supply.
The heavily guarded US reserves represent the world’s largest emergency reservoir and are located in some 60 underground reservoirs located at four sites. These contain 714 million barrels according to a report from the Department of Energy in late August.
It is quite unusual for large numbers to be removed from there, except in an emergency. For example, when major hurricanes affect the Gulf of Mexico, crucial for oil production, or in response to major international crises.
Threat
Inflation, at a three-decade high at 6.2% year-on-year in October and heavily pressured by the price of gasoline, is a serious political problem for Biden.
“These (price) increases affect the popularity of the president,” said John Kilduff of Again Capital.
The average price of a gallon of gasoline – 3.78 liters – rose to $ 3.41 from $ 2.12 a year ago – more than 60% -, according to the American motorists association AAA. The $ 4 mark is problematic for consumers, experts say.
According to a senior official in the Democratic administration, the release of this stock will begin between mid and late December, and it is possible that new interventions to stabilize the market will take place, “in response to a pandemic unique in the century.”
“The president is ready to take additional action if necessary and is prepared to use his full authority, working in coordination with the rest of the world to maintain an adequate supply as the pandemic is left behind,” he added.
Politics
The decision comes at a time when gas prices at service stations continue to rise in the United States, representing a major political problem for Biden, especially on the eve of Thanksgiving, a holiday in which Americans travel across the country to reunite with their families.
To reach the agreement, Washington and Beijing put aside their rivalry, since China is also one of the largest oil consumers in the world.
Attempts by the United States to pressure producing countries, especially Saudi Arabia, to increase their supply have so far not worked.
“This historical and unorthodox action is clearly a message that tells OPEC (Organization of the Petroleum Exporting Countries) that it is not the only player in the oil market,” said Louise Dickson, an analyst at Rystad Energy.
The US president also has his sights on the large companies in the sector, indicated to transfer the increases in the price of crude automatically to the stations.
service purposes at a time when they are making huge profits.
Of the 50 million barrels that the United States will release, 18 million will be sold directly in the coming months; while the other 32 million will enter the market under an “exchange” system, since they will be returned to the reserves in a few years.
Source From: Ambito
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