Since Russia’s invasion of Ukraine, President Biden has overseen the largest sale of oil from the Strategic Oil Reserve to ease the price of petrol pumps.
The Department of Energy has released 160 million barrels of crude since March, more than a quarter of its stockpile, slashing its reserves to its lowest level in 40 years. Some oil experts say continuing the withdrawal could test the country’s energy security.
However, the administration is not ready to replenish its stockpile even though oil prices have fallen sharply from their peak. Instead, instead of ending the release in October as planned, he decided to extend it for at least another month at a lower rate.
“This is a dangerous policy,” said Kevin Book, managing director of Washington consulting firm ClearView Energy Partners. right.”
The exploitation of reserves this year was intended to make up for supply shortfalls resulting from Western sanctions against Russia, a major oil and gas exporter. Some experts had predicted that oil prices would hit well above $150 a barrel. But while prices soared shortly after the February invasion, the U.S. benchmark, West Texas Intermediate, fell to around $82 per barrel.
Gasoline prices fell to $3.68 a gallon last week from a national average of just over $5 a gallon in June, according to the AAA Automobile Club. They’ve gone up about 10 cents since then. Energy experts estimate that preliminary releases have cut gasoline prices by 40 cents.
Sarah A. Emerson, president of consulting firm ESAI Energy and director of Chesapeake Energy, said: oil and gas producers;
President Biden
With the midterm elections approaching, here stands President Biden.
The remaining drop in oil and gasoline prices can be explained by the slowing global economy, the Covid-19 lockdown in China, and Russia’s success in rerouting oil exports from Europe to China and India. The International Energy Agency had initially said Russia’s oil production could fall by up to 3 million barrels a day, but Russia’s exports could fall by 1 from her 100 million barrel global market. It only decreased by about 400,000 barrels per day.
Industry executives said that while pre-orders helped lower prices, they were a short-term relief and did not encourage production of new supplies.
“I don’t know if it will have a long-term impact,” said Sean Strowbridge, chief executive of the Corpus Christi Authority, which manages the largest port of U.S. oil exports. “What I do know is that if the federal government’s intention is to replenish its intended stock with reserves, it will take an enormous amount of time.”
Amid growing concerns about climate change, replenishing reserves could even increase prices as it increases demand and encourages drilling.
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For now, though, lower gas prices have helped ease inflation, improving the prospects for Democrats in the midterm elections. This reserve is still about 420 million barrels in underground caverns. At its maximum capacity of 4.4 million barrels per day, it would take him 95 days to pull out all his stocks in the event of a crisis.
The country’s energy profile has fundamentally changed since Congress established a stockpile in 1975 in case supplies were disrupted by natural disasters, Middle East wars, or embargoes. The gasoline lines from the 1973-74 Arab oil embargo were fresh in the memory of lawmakers and voters.
Since then, American oil production has increased significantly, transforming the country from a vulnerable fuel importer into a major energy exporter. It leans toward hydrogen.
This stockpile has been used several times to stabilize supplies, including the Iraq and Kuwait crises of 1990-1991, Hurricane Katrina in 2005, and the turmoil in the Middle East caused by the Arab Spring in 2011.
Several past presidents have always said that they dumped oil from their reserves during election campaigns, but the purpose was explicitly not to lower prices, but to boost supply.
Mark Finley, an energy economist at Rice University, said: “Before, the slogan was ‘We’re not here to manage markets, we’re here to manage physical scarcity’. had.
In contrast, the current administration explicitly touts the release as a relief to consumers.
“The bottom line is that if we want gas prices to go down, we need to get more oil supplies now,” Biden said in March when he announced his release policy.
A new test for global oil markets will come when Europe plans to ban most Russian oil imports on 5 December and ban Russian petroleum products on 5 February. Energy shortage in Europe.
A European Union embargo could drain Russian oil from the market at 2.4 million barrels a day. As some officials have threatened, Russia could retaliate by halting oil exports if the West imposes price caps on its own oil.
Many economists say the 20% drop in oil prices over the past two months could soon be reversed. JP Morgan recently predicted that the global Brent crude benchmark, currently around $88 a barrel, will exceed $100 in the fourth quarter.
When it announced in November that 10 million barrels per day of oil would be sold from its reserves, administration officials said it would then be guided by supply and demand for oil on global markets. There appear to be no immediate plans to replenish the reserves.
Andrew Ripow, president of Houston consulting firm Ripow Oil Associates, said the release was only a stopgap measure as it did nothing to add energy production. “If the sale of the Strategic Oil Reserve stops, how will the market compensate for that supply?” he said.
But continuing to withdraw reserves creates its own set of risks, he added. “Does the Strategic Oil Reserve have enough stock to cover future supply disruptions?” he asked.