Lexington-Fayette, Kentucky 2021-11-24 22:30:33 –
President Joe Biden made a big announcement this week about oil.
“We have announced that we have had the largest release ever from our strategic petroleum reserves to provide the supply needed to recover from this pandemic,” Biden said on Tuesday.
The United States plans to release 50 million barrels of oil that could reach the market between mid-December and late December.
According to the White House, the government hopes the move will help lower gas prices. This is the highest since 2014, at around $ 3.43 nationwide.
In 2019, the United States used about 20.5 million barrels of oil per day, so 50 million barrels is slightly below the supply for two and a half days.
But the president thinks it makes a difference.
“Combination of our actions does not solve the problem of high gas prices overnight. It makes a difference. It takes time, but eventually the price of gas in a place that fills the tank. You should see it go down, “Biden said.
“The United States has huge strategic oil reserves that are to be used when supply is disrupted, such as when there is a large hurricane that disrupts oil facilities. In that case, there is no disruption in supply due to weather or other factors, only oil prices are rising, “said Jack Strauss. He is a professor of economics at the University of Denver, specializing in forecasting and applied economics.
He explains why the president is so worried about oil prices.
“Oil prices are always the main source of inflation. Even if they increase, they don’t increase by 2, 3, 4, or 5%, so they increase by 30, 50, or 60%,” says Strauss.
Not everyone shares the optimistic view that oil releases lead to lower gas prices.
“We feel it’s just confusing the cart. As a result, OPEC is already looking for ways to counter it, and today oil prices are rising about 2%. It turns out, “said Brady Pelton, general contractor of the North Dakota Petroleum Council, which represents oil. Producers and contractors in the state.
North Dakota produces the second highest number of barrels of oil per day in the United States. According to Brady, oil production is up about 1% from expectations.
“I think North Dakota’s production will gradually increase in early 2022, which is also speculative and not worth mentioning,” Pelton said.
Other organizations also expect oil production to increase.
A monthly report from the International Energy Agency predicts an increase of 1.5 million barrels per day in the coming months, indicating that prices may begin to fall shortly.
“Oil production, especially hydraulic fracturing, responds to rising oil prices,” Strauss said.
Generally, the higher the price, the higher the production.
The next move comes from OPEC, the Organization of Petroleum Exporting Countries.
OPEC may reassess oil production following Biden’s announcement.