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The Biden administration has decided to release about a million barrels of oil a day from US strategic reserves. “This is an unprecedented decision,” the US government said. The aim is to compensate for the supply problems on the markets caused by Russia with the war against Ukraine. The total to be released from strategic reserves will be 180 million barrels over approximately six months. However, it will take a few months (not days) for production to reach desired levels. At 7:30 p.m., 1:30 p.m. local time, Biden will speak from the White House on measures to reduce the impact of Putin’s war on energy prices.
The impact on ad prices
Following the announcement, oil began falling sharply, ending with a thud in New York, where prices fell 6.22% to $101.11 a barrel. Meanwhile, the ruble is recovering against the dollar, returning to preinvasion levels and settling at 76 against the dollar. Biden’s plan would be accompanied by diplomatic pressure on the International Energy Agency to coordinate a global release that also includes parts of other countries. A final decision has not yet been made, but the White House could make an announcement about his surgery as early as today. West Texas intermediate futures fell as much as 5.5% on Thursday on signs the US is considering a release. The possible move comes as OPEC+ resists US pressure to increase production to lower prices.
Saudi Arabia prioritizes relations with Russia
Riyadh has prioritized its relationship with Moscow, a coleader of the OPEC+ alliance, and the cartel insists there is no shortage of oil in the market. The group meets on Thursday and is expected to approve only a modest increase in supply. The White House has announced that President Biden will speak about his efforts to bring down energy prices “and gas prices at the pump for American families.” Biden is aiming to slow the pace of inflation and lower gasoline prices, especially in the context of the upcoming US midterm elections in November.
What’s going on at the pump
Despite government assurances that gas pump prices would fall in 2022, they have instead risen dramatically, with gasoline currently costing nearly $6 a gallon in California, according to the AAA Auto Club. The national average is $4.24, according to the company. Biden has already ordered two major oil releases from US reserves in the past six months: 50 million barrels in November and another 30 million barrels in March following the invasion of Russia. Previous releases have had limited impact on prices: Average pump prices in the US have risen after the government began discussing its first release last fall.
White House Lobbying
At the same time, the Biden administration is also struggling to persuade OPEC to increase production enough to bring down gasoline prices in the United States. Although oil in the reserve has been sold or traded about two dozen times, also to mitigate supply disruptions, reduce deficits and offset federal spending, it has never been on this scale. As of March 25, the reserve had 568 million barrels remaining, according to the Energy Department. Biden discussed oil supplies and the potential for another round of decommissioning from reserves at meetings with allies in Europe last week, according to national security adviser Jake Sullivan, who said the matter was a “key talking point” at a G7 meeting.