President Joe Biden ordered on Thursday an unprecedented release of crude oil reserves to relieve American households in the face of the increase in fuel prices as a result of the Russian invasion of Ukraine.
The move will also supply a thirsty global energy market with one million barrels a day of raw for six months, in order to reduce the wave of inflation in United States.
Biden Said your plan “two parts”or is it just for “alleviate the pain that families have now but for end this era of dependency and uncertainty and lay the foundations for true and lasting energy independence from United States”.
He also warned oil companies not to be complacent withn “record profits” due to the increase in prices. “No American business should take advantage of the pandemic or the Actions by Vladimir Putin for enrich themselves at the expense of american families”, said.
Instead, they should “invest those profits in production and innovation”.
“The magnitude of this release (of reserves) is unprecedented,” the White House said in a statement.
“Never in the world have reserves been poured (into the market) at a rate of one million barrels per day for so long. This record release will bring a historic amount for serve as a bridge until the end of the year, when domestic production increases”add note.
The move will dump a significant amount into the overheated global oil market, which has sent ripples through the US economy.
Battling against bad data in the polls and with legislative elections in which the opposition is emerging as the favorite to regain control of Congress, the White House tries to show that Biden has a solution to a problem born in the pandemic and extended by the war in Ukraine.
The release of reserves will be equivalent to increasing world supplies by about 1%.
Oil fell sharply after initial reports of the US plan, which came as oil exporters group raw OPEC+ decided to modestly increase production, ignoring calls to ease price pressure from the war in Ukraine.
Biden in the pillory
The release of US crude will dwarf previous uses of strategic reserves announced by Biden alongside other countries on March 1 after the Russian invasion, and also last year, in response to rising inflation.
Despite a recovering economy and the retreat of the covid-19 pandemic, Biden he gets little credit from voters, who instead blame him for rising prices everywhere from the supermarket to car dealerships.
Disruptions in the supply chain related to the different rates of economic recovery in the world are part of the phenomenon of inflation.
Also behind this politically dangerous trend are fuel costs, which, in turn, drive up transportation prices for almost all goods.
And for drivers, price shocks at gas stations are a constant source of irritation.
Gasoline prices are currently averaging $4.23 a gallon, 47% higher than a year ago.
After the announcement of Bidenthe barrel of raw it fell nearly 7% in New York to $100.28 and in London 6.44% to $107.91.
“Is it worth giving up a million barrels a day to get a price reduction of only 5 dollars (a barrel)?”, Matt Smith, an analyst with the Kepler cabinet, wondered.
“Although this use of reserves will certainly help contain the market in the short term, it does not provide a long-term solution”he added.
The prices of raw They reached almost 140 dollars in March due to concern about Russia, one of the world’s largest producers, which sparked a war in Ukraine and was the target of multiple international sanctions.
Prices have fallen back a bit since United States banned Russian imports on March 8, but they have hovered around $100 since then.