The Biden government has urged numerous of the world’s top oil-consuming countries, particularly China, India, as well as Japan, to reconsider discharging crude inventories in a concerted attempt to cut global energy costs. The unexpected request comes as US President Joe Biden faces public criticism over rising gas prices and other consumer expenditures, which are being driven by a resurgence in business growth from the lows reached early in the coronavirus outbreak. It also shows the United States’ irritation with members of the Organization of Petroleum Exporting Countries and its partners who have repeatedly refused to increase output in response to repeated demands from Washington.
The USA and its allies have previously planned strategic petroleum stockpile releases, such as in 2011 amid war in OPEC member Libya. This idea, however, poses a historic threat to OPEC, the organization that has controlled oil prices for more than 50 years, since it includes China, the world’s largest crude consumer. A Japanese industry ministry official stated the US had asked Tokyo for help in coping with increasing oil prices, although he couldn’t clarify whether the request involved coordinated inventory releases. According to the official, Japan cannot utilize reserve releases to cut prices by law. A top cabinet official did not respond to a request for comment.
China’s state reserve bureau highlighted that it is focusing on releasing crude oil reserves, but refuses to elaborate on the US proposal. A South Korean official stated that the US has requested that certain oil reserves be released. “We are extensively analyzing the US request; nevertheless, because of rising petroleum prices, we do not release oil reserves. We might discharge oil reserves in the event of a supply shortage, but not in response to increased oil prices,” added the official. As per a US source who was involved in the conversations, the US portion of any prospective release of stockpiles would need to be greater than 20 million to 30 million barrels to have an impact on markets.
Several sources familiar with the situation have emphasized that discussions regarding a timed supply release have not been finished, and no final call has been taken on whether to follow any particular action on oil & gas prices. The White House refused to elaborate on the specifics of its discussions with foreign countries. Following Reuters’ story on the White House conversations, US crude oil and international benchmark Brent fell, with the latter falling below USD 80 per barrel.
OPEC as well as other suppliers, particularly Russia, have been supplying approximately 400,000 barrels every day to the industry each month, but have rejected Biden’s pleas for faster increases, warning that the recovery in demand might be fragile. Mohammad Barkindo, Secretary-General of the OPEC, stated on Tuesday that a worldwide supply excess might occur as early as December. “These are warnings that we need to be extremely cautious,” he told journalists. Rising oil costs have irritated Biden in the run-up to the 2022 midterm elections, which will decide whether his Democratic party keeps its narrow majority in the United States Congress.
Several Biden allies link his recent drop in public support ratings to rising inflation rates of oil & gas, F&B, as well as other sectors. Over the last year, the consumer price index has risen by 6.2%, with its energy component increasing by 30%. The International Energy Agency, located in Paris, which oversees national Strategic Petroleum Reserves (SPRs) for its members, the United States, Japan, as well as a majority of Western countries, refused to respond. In the past, the International Energy Agency (IEA) has managed releases involving several nations.