Biden uses oil reserves to ease gas prices, does that work?

After weeks of cues and speculation, a group of major oil consumers, including the United States, have announced coordinated plans to tackle rising energy costs by releasing crude oil from strategic stockpiles. The question is whether it works.

In a rare coordination match with other oil-consuming countries, the U.S. government said on Tuesday that it plans to offer as much as possible. 50 million barrels from strategic petroleum reserves.. China,India, Japan, South Korea and the United Kingdom will participate in this effort.

The US decision to use emergency stockpiles is President Joe Biden Faced with increased pressure on the stem Rising fuel prices for Americans It has been accused of the highest inflation rate in decades. However, it also carries risks, including the possibility of a backlash from OPEC +, which may deny relief. And because there are so many unknowns left, such as whether oil is even the grade the US market is looking for, there are actually many (if any) homes to prevent the cruel and expensive vacation travel season. I don’t know if I will take a rest.

Here’s what we know so far:

How soon will additional crude oil be on the market?

The Department of Energy offers 32 million barrels of pre-sale in the form of an exchange and 18 million barrels pre-sold by Congress. Exchange bids will end on December 6th. For those who get barrels from the exchange program, supplies are expected to arrive between January and April, but may arrive in late December. For barrels for sale, bids will not be announced until December 17th. It can still take weeks from the bid to the actual delivery, and there is little chance of immediate relief.

Who gets the oil?

The US government is expected to make oil available to qualified bidders, including major oil companies and international trading companies. In previous SPR releases, the refiner awarded the oil was Marathon Petroleum Corp. And ExxonMobil Corp. and other large companies were included. In the past, trading companies such as Trafigura and China’s Unipec have also signed contracts. Some barrels from previous sales were also sent abroad. So far, there is no provision to store this oil in the United States. This time you can see who will get this oil by December 14th.

Where is the oil now?

DOE operates a total of four underground storage caves, two each in Texas and Louisiana. In total, it currently stores about 606 million barrels. This is the lowest since 2003 as it sells as part of a government mandated program.

What kind of crude oil is coming out?

DOE has not released specific details about the types of crude oil offered, but has given some clues. Up to 10 million barrels are available from each of the two Texas sites, and 5 million barrels are available from one site in Louisiana. These locations contain most of the sulfur-rich sour crude oil. One other site in Louisiana offers up to 7 million barrels, including most of the sweet crude oil. This is important because sour crude oil usually requires expensive processing and is no longer favored by refiners around the world. Natural gas..

Does this release make a dent?

Everyone has been talking about this possibility for so long that many traders say the release plan has already been burned into oil prices. It will explain why oil prices are rising after the announcement. There is also concern that OPEC + officials who do not want to be bosses could respond by canceling their plans to increase production and denying the addition of stockpiled oil to the market. Standoffs trigger a battle to dominate the global energy market. In short, consumers looking for pump bailouts, if any, may not yet see a drop in gasoline prices for months.

Also, in 2019, before the pandemic, the United States consumed 20 million barrels of oil per day. Therefore, while the 50 million released from US reserves is associated with foreign releases, it may not be sufficient to significantly change the market equation.

Biden uses oil reserves to ease gas prices, does that work?

Source link Biden uses oil reserves to ease gas prices, does that work?

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