Sat. Nov 27th, 2021

US says oil supply has not kept pace with demand during pandemic recovery, which justifies the use of reserves.

US President Joe Biden has ordered the release of 50 million barrels of oil from the Strategic Reserve to help lower energy costs.

The move on Tuesday was made in collaboration with other major energy-consuming countries, including China, India, the United Kingdom, Japan and South Korea, the White House said.

A senior administration official told reporters the releases would start in mid to late December, and that further intervention was possible to stabilize the market as the US government continued to respond “to a once-in-a-century pandemic”.

“As the president said, consumers are currently experiencing pain at the pump,” the official said.

While aimed at global energy markets, the release of the oil also has political implications as US voters prepare to handle with higher inflation and rising prices ahead of US Thanksgiving and winter holidays.

Gas prices are at about $ 3.40 per gallon, more than double their price a year ago, according to the American Automobile Association.

Meanwhile, Biden has scrambled to reform much of its economic agenda around the issue of inflation, saying its recently successful $ 1 trillion infrastructure package will reduce price pressures by making it more efficient and cheaper to transport goods.

Republican lawmakers have criticized the administration’s approach, saying it was responsible for inflation reaching a 31-year high in October.

Senate Republican leader Mitch McConnell tore up the administration on inflation in a floor speech last week, saying the victims of higher prices were middle-class U.S. citizens.

“The three biggest drivers of the staggering 6.2 per cent inflation rate we recorded last month were housing, transport and food,” he said. “These are not luxuries, they are essential, and they take a much larger share of families’ budgets from the middle class.”

Delegates from the Organization of the Petroleum Exporting Countries (OPEC) previously warned the organization, which is made up of major oil-producing countries, may have to adjust current plans to boost production if the US continues to release the reserves, saying the move is unjustified.

Largest known emergency reserve

The U.S. Strategic Petroleum Reserve, launched in 1975, is an emergency supply to preserve access to oil in the event of natural disasters, national security issues and other events.

It is the largest known emergency oil reserve in the world and is maintained by the Department of Energy. The reserves are stored in caves created in salt domes along the Texas and Louisiana Gulf coasts.

There are about 605 million barrels of petroleum in the reserve, which can hold up to 714 million barrels.

The Biden administration argued that the supply of oil did not keep pace with demand, as the world economy emerged from the pandemic, and the reserve is the right tool to help alleviate the problem.

“As we emerge from an unprecedented global economic downturn, oil supplies have not kept pace with demand, which has forced working families and businesses to pay the price,” Energy Minister Jennifer Granholm said in a statement on Tuesday. . “This action underscores the president’s commitment to use the tools available to reduce costs for working families and to continue our economic recovery.”

The decision comes after weeks of diplomatic negotiations.

The U.S. Department of Energy will make the oil available in two ways: 32 million barrels will be released in the next few months and will be returned to the reserve in the years ahead, the White House said.

Another 18 million barrels will be part of a sale of oil previously authorized by Congress.

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