China is not the only big oil consumer the United States has asked to release oil from its reserves in a bid to rein in prices, Reuters has reported, citing unnamed sources.
Earlier this week, the South China Morning Post reported that President Joe Biden had asked China's Xi Jinping to release oil from storage in a bid to put a lid on oil prices that have pushed U.S. retail fuel prices to levels that are worrying Washington.
According to the Reuters sources, Japan, South Korea, and India were also among the countries Washington approached with the suggestion to release oil from their reserves.
"We're talking about the symbolism of the largest consumers of the world sending a message to OPEC that 'you've got to change your behavior,'" one of the Reuters sources said.
The option of releasing crude from the state reserve has also been discussed in the U.S. itself, but some commentators with knowledge of how the energy industry works have expressed skepticism it would have the desired effect. One of the reasons given for this skepticism is that the president can only order the release of a limited amount of crude oil from the strategic petroleum reserve of the United States, and this amount will only have a temporary effect on prices.
"It seems the energy market is convinced that even if the U.S. resorts to tapping the Strategic Petroleum Reserve, the benefits would be minimal … to the U.S. consumer," Oanda analyst Edward Moya said in a recent note, as quoted by Reuters.
As for whether a concerted reserve-draw effort would have the effect of making OPEC start producing more, this, too, is questionable. OPEC and its OPEC+ partners have made it clear they would remain cautious about adding too much oil to global markets, and the one-off release of a few million barrels by each of the countries contacted by the Biden administration would hardly worry them.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
there is no way to stop it at this point. Too little invest in the past 5 years and banks closing access to funding for new junior exploration.