According to reports, President Joe Biden asked large oil buyers India and Japan (as well as China) to look into releasing strategic crude oil stockpiles.
After reports of Biden’s request for and China’s decision release crude oil reserves, oil prices fell about 4 percent to their lowest level in six weeks. However, they recovered some ground late in the day.
Oil prices around the world fluctuate quickly due to speculation about future demand and supply. The prospect of strategic reserve additions to supply also contributed to prices falling.
Phil Flynn from Price Futures Group, Chicago, said that the market will continue to feel nervous because it’s on guard for a possible release.
Visalia, California displays Chevron gasoline prices above the $5 mark on November 16th. After reports about a coordinated stockpile, the oil price fell Thursday
From 2019 through the present, WTI crude oil prices are shown. According to reports, Biden has asked China for strategic reserves. Oil prices are now down from their highs.
While oil prices have fallen from late October’s peak, it hasn’t yet led to significant changes at gas pumps.
Last week, the national average price of gas fell one penny from the prior week, to $3.41, in the first weekly decrease in months according to the AAA Gas Price Index.
California’s gas is still the most expensive at $4.68 per gallon. Hawaii, Nevada, and Washington are next (3.97) and 3.97 respectively.
Andrew Gross (AAA spokesperson) stated, “A small dip in gasoline demand, perhaps due to seasonal driving habits changes is contributing to some price reduction at the pump.”
He said that “Unfortunately, there is an ongoing shortage of crude oil” which will cause gas prices to fluctuate, rather than drop, over time.
New data from Energy Information Administration (EIA) shows that gasoline demand fell from 9.9 million barrels/day down to 9.26million barrels/day.
This was combined with an increase of domestic crude oil supply, which caused prices to drop.
The national average gas price dropped one penny last week to $3.41 from the previous week. This was the first weekly decline in several months.
AAA believes that pump prices for consumers will remain high as long as the oil price is above $80 per barrel.
Brent crude, which tracks the global price of oil, hit a session low of $79.28 on Thursday morning, but was up up 53 cents, or 0.7 percent, at $80.81 a barrel at 11.55am.
West Texas Intermediate crude futures that track US oil prices were higher by 18 cents to $78.54 per barrel after hitting $77.08 in October.
Even if it is only the U.S. or China’s strategic reserves, a release will most likely cause prices to drop temporarily.
Washington’s attempt to calm markets and ask China to participate in a coordinated effort for the first-time comes amid high gasoline prices as well as other inflationary pressures that have provoked a political backlash.
Biden faces strong pressure from the midterm elections in 2012 to lower gas prices, and stem rising inflation.
According to a Reuters poll, 67% of Americans agree that inflation is a major concern.
Biden, frustrated at the refusal of the United States to accelerate oil production, is frustrated as the global economy recovers from the pandemic.
OPEC+ is scheduled to meet December 2. The group took a slow approach in boosting production, recognizing that the recovery is too fragile to warrant more supply.
The United States and its allies had coordinated the release of oil reserves before but this was the first time that they included China. This is an unusual move.
The move doesn’t directly affect the Paris-based International Energy Agency (of which both the United States and China are members).
Biden faces strong pressure from the midterm election next year to lower gas prices, and stem rising inflation.
Since 2020, the price of Brent crude is a reflection on global oil prices.
The IEA, which has 30 members, was established in 1974 to be an energy watchdog. Its main role is to ‘coordinate a collaborative response to major interruptions in the supply oil’, it states on its website.
The IEA says its emergency response plans are not intended to deal with rising prices.
The IEA has previously coordinated three emergency releases.
Oil prices reached seven-year highs in October as oil markets focused on the rapid rebound of demand due to more people receiving COVID-19 vaccines, and the lifting of lockdowns.
As demand increased, prices rose. OPEC+ also decided to increase output slowly.
Although the International Energy Agency (OPEC) and the International Energy Agency have indicated that more supplies will become available over time, Washington insists on a faster pace.
Because it includes China, the top importer, the proposed release of reserve represents an extraordinary challenge for OPEC.
China’s State Reserve Bureau said that it is working to release crude oil reserves, but declined comment.
Officials from Japan’s industry ministry said that the United States has asked Tokyo for its cooperation to deal with rising oil prices. Japan cannot, however, use reserves releases to reduce prices.
South Korean officials said they were reviewing U.S. requests for Seoul to provide oil resources, and added that it would only allow crude oil to be released in the event of an imbalance.