US digs into oil reserves as prices surge
Print Edition
PRESIDENT Joe Biden on Tuesday ordered a record 50 million barrels of oil released from America’s strategic reserve, aiming to bring down gasoline and other costs, in coordination with other major energy-consuming nations.
The US action is focused on helping Americans cope with higher fuel and other prices ahead of Thanksgiving and winter holiday travel. Gasoline prices are at about US$3.40 a gallon, more than 50 percent higher than a year ago, according to the American Automobile Association.
“While our combined actions will not solve the problems 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 see the price of the gas drop where you fill up your tank.”
The government will begin to move barrels into the market in mid- to late-December. Gasoline usually responds at a lag to changes in oil prices, and administration officials suggested this is one of several steps toward ultimately bringing down costs.
Oil prices had dropped in the days ahead of the announced withdrawals, a sign that investors were anticipating the moves that could bring a combined 70 million to 80 million barrels of oil onto global markets. But in trading after the announcement, prices shot up roughly 2 percent instead of falling.
The market was expecting the news, and traders may have been underwhelmed when they saw the details, said Claudio Galimberti, senior vice president for oil markets at Rystad Energy.
“The problem is that everybody knows that this measure is temporary,” Galimberti said. “So once it is stopped, then if demand continues to be above supply like it is right now, then you’re back to square one.”
Shortly after the US announcement, India said it would release 5 million barrels from its strategic reserves. The British government confirmed it will release up to 1.5 million barrels from its stockpile.
Japan’s Prime Minister Fumio Kishida said yesterday his government would release oil reserves.
“We have been working with the United States to stabilize the international oil market and we have decided to join the United States in selling part of our national oil reserves in a way that does not contravene existing (Japanese) oil reserve law,” Kishida told reporters.
Japan will release “a few hundred thousand kiloliters” of oil from its national reserve, but the timing of the sale has not been decided, industry minister Koichi Hagiuda told reporters yesterday.
Industry ministry officials said details were still being worked out.
One kiloliter is about 6.3 barrels of oil.
The overall national stockpile in Japan is about 490 million barrels.
Kishida said Japan would continue to lobby oil-producing countries to combat drastic price moves.
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