President Biden announced Tuesday that he would release of 50 million barrels of crude oil from the U.S. Strategic Petroleum Reserve. In an unprecedented and highly coordinated move, the U.S. will release its reserves together with China, Japan, India, South Korea and the U.K.
According to the Administration, the oil may begin moving as early as mid-to-late December.
West Texas Intermediate crude fell on the news, down over 1% in early morning trading.
Showdown with OPEC+
The Biden team is releasing oil from the U.S. reserves following OPEC+ countries refusal to boost production. While more supply with move prices lower, there is geopolitical risk associated with the maneuver as it could prompt a response by OPEC+. The group could scale back its own production — thereby causing a kind of “showdown” in global energy markets.
It is rare to tap strategic reserves as they are designed to be used in times of real emergencies. For example, the U.S. released 60 million barrels following the unrest that disrupted supplies in Libya in 2011.
Nonetheless, with gas prices up 50% from this time last year and Americans increasingly citing inflation as their biggest economic and political concern, the President has been faced with trying to stem the crisis.
Last week Biden attempted to point the finger at the energy companies themselves, questioning whether they might be illegally manipulating prices. In a letter to the Federal Trade Commission’s Lina Kahn, has asked her to examine the issue.
U.S. Energy Independence in Danger
Prior to Biden assuming the Presidency, the U.S. was considered energy “independent” and, as a result of U.S. drilling, was less reliant on the Middle East. However, with the shutdown of the KeyStone pipeline and other ESG efforts to suppress the traditional oil and natural gas industry, there are growing concerns about the future of energy independence as it begins its transition to a green energy style economy.