US president Joe Biden has moved to tackle the cost of rising oil prices by asking the department of energy to make available 50 million barrels of oil, a move that NBC called a ‘rare step’.
Biden’s action is also an attempt to tackle rising inflation, a subject that is vexing economists, banks, and politicians across the world.
As NBC reported: “The release of the oil reserves should quickly translate into lower prices at the pump, and officials will be watching to make sure energy companies are passing along lower oil prices to consumers, a senior administration official said Tuesday.”
The broadcaster added: “Of the 50 million barrels, 32 million will be returned to the Strategic Petroleum Reserve over the next three years on the assumption that prices go down in the future, and 18 million will come from a sale approved by congress in the 2018 budget.”
The US was not the only nation to release its reserves, with the decision made in conjunction with China, Japan, India, South Korea, and the United Kingdom.
CNN Business reported on the rarity of such a move. It quoted the International Energy Agency (IEA), which said there had been three coordinated releases of oil stocks since its founding in 1974.
These were, wrote CNN, “[…] before the Gulf War in 1991, after Hurricanes Katrina and Rita damaged oil facilities in the Gulf of Mexico in 2005, and in response to supply disruption caused by war in Libya in 2011″.
The release of reserves come a week after the IEA said that the current surge in oil prices should abate.
As Expert Investor reported last week, the IEA’s latest monthly report said: “[…] while the world oil market remains ‘tight by all measures’, a reprieve could be ‘on the horizon’.” Among the findings and predictions were that, despite global demand increasing, further lockdowns caused by a resurgent coronavirus pandemic aligned with weaker industrial activity and higher oil prices should temper demand.
Meanwhile, CNBC has reported that oil prices have dropped due to the release of reserves. Writing on Tuesday, it said: “US West Texas Intermediate (WTI) crude futures fell 12 cents, or 0.2%, to $78.38 a barrel at 0122 GMT, reversing out of a 2.3% gain in the previous day. Brent crude futures slid 32 cents, or 0.4%, to $81.99 a barrel, having risen 3.3% on Tuesday.”