Biden orders 'unprecedented' release of oil reserves
US President Joe Biden has ordered a major
release of oil from America's reserves in an effort to bring down high fuel
The release of up to 180m barrels of oil over
six months is the largest since the reserve was created in 1974.
Oil prices dropped on reports of the move,
which is aimed at easing a supply crunch sparked by war in Ukraine.
But the release - of about 1m barrels a day -
is unlikely to fully resolve the energy crisis, analysts say.
Mr Biden promised further action to boost US
output, saying the release would "serve as [a] bridge until the end of the
year when domestic production ramps up".
He called for companies to pay extra if they
choose not to use oil wells on land they lease from the government, as well as
investments to speed up the adoption of greener energy sources.
Following Mr Biden's remarks, US oil
benchmark West Texas Intermediate was more than 7% lower at about $100 a
barrel, while Brent Crude fell roughly 5.4% to around $107.
The soaring cost of fuel has become
a major political issue around the world, including in the US, which hosts
mid-term elections in November.
Mr Biden said the scale of the
release from the Strategic Petroleum Reserve - which together amounts to less
than two days of global consumption - was "unprecedented".
many barrels of oil are held in US reserves and how much does the world
America's Strategic Petroleum Reserve was created
following the energy crisis in the 1970s
It is located in storage caverns in salt domes along
the Gulf Coast in Texas and Louisiana
The reserves held about 568m barrels as of 25 March,
down from more than 700m at their peak in 2009
The International Energy Agency has forecast
consumption of more than 100m barrels per day of petroleum and liquid
fuels this year
Thursday's announcement marked the
third time in six months Mr Biden has moved to draw down America's crude oil
But the release of additional
reserves is unlikely to be enough to compensate for lost supplies from Russia -
the world's second-biggest oil exporter after Saudi Arabia.
"While stock releases will help
to keep a lid on prices in the short term, we think it will take an increase in
global production to spark a sustained fall in prices," said Edward
Gardner, commodities economist at Capital Economics.
Energy prices have fallen back since
then, but oil is still almost 70% higher than it was a year ago.
House under pressure
Analysis by Samira Hussain, BBC News
It makes for an excellent headline:
President Biden releases unprecedented amounts of oil from strategic reserves.
But it really only offers a temporary fix to global shortages. So why is the
White House even bothering?
Domestically, the President is under
a tremendous amount of pressure. November is the midterm elections and
Democrats hold a very slim majority that they are desperate to hold on to.
Rising inflation was already an
issue, and Republicans have been laying the blame for the high cost of living on
the White House and specifically Mr Biden.
The record high cost of fuel just
adds to the pain being felt by the American middle class. And it certainly
doesn't jive well with the president's "Joe from Scranton" vibe.
Global demand for energy had been
rising prior to Russia's invasion of Ukraine as economies started to reopen as
coronavirus lockdown measures were relaxed.
However, the war in Ukraine has
raised fears of supply issues, with warnings that Russian oil exports could
fall by as much as 3m barrels a day.
Most major energy-producing nations
are either at full capacity or are unwilling to increase output.
On Thursday, the Organization of the
Petroleum Exporting Countries (Opec) and its allies, including Russia,
confirmed they were sticking to their existing deal to gradually increase
The decision came despite pressure from the
US, UK and others on members of the group of oil producing nations to boost
"The consensus on the outlook pointed to
a well-balanced market," the group said.
"Current volatility is not caused by
fundamentals, but by ongoing geopolitical developments."
The International Energy Agency (IEA) has
called an emergency meeting but it is unclear whether other countries,
including the UK, France, Germany and Japan, will follow the US by releasing
Mr Biden said he was coordinating with
Western nations on the release of the stockpiles and expected them to release
another 30 to 50 million barrels.
Also on Thursday, Japan said that it would
take emergency measures to secure supplies of seven strategic materials it
relies on heavily from Russia or Ukraine as the war and sanctions cause
disruptions to supplies.
The country's industry minister said the
actions include government support to boost domestic production, alternative
procurement and to help technological developments to reduce use of the
materials, which include liquefied natural gas and gases used in computer