Biden aims to lower gas prices with release of oil reserves
London (CNN Business)Some of the world’s biggest energy-consuming nations are joining a US-led effort to release strategic oil reserves to try to cool high prices and tame inflation.
In a statement issued Tuesday, the White House said China, Japan, India, South Korea and the United Kingdom would join the initiative following weeks of discussions to formulate a plan to arrest price hikes.
The International Energy Agency, which monitors global oil supplies on behalf of the world’s leading economies, said it respected the decisions made by individual countries on “how best to respond to the specific challenges and circumstances they each face.”
“We recognise that the rise in oil prices is placing a burden on consumers and has added to inflationary pressures during a period when the economic recovery remains uneven and faces a range of risks,” the agency said in a statement.
The United States will release about 50 million barrels from its Strategic Petroleum Reserve, with the oil expected to hit markets in December. Here’s what we know so far about what other countries are doing:
India has agreed to release 5 million barrels, to be timed in agreement with the other five nations.
“India has repeatedly expressed concern at supply of oil being artificially adjusted below demand levels by oil producing countries, leading to rising prices and negative attendant consequences,” the Indian government said in a statement shortly after the White House announcement.
It said several Indian state governments had already taken “difficult steps” to cut local fuel taxes.
“Despite the high fiscal burden on the government, [they] were taken in order to provide relief to citizens,” it added.
The South Korean government said in a statement that the amount and timing of its oil reserves release would be decided through consultation with the other countries, but said it was expected to be at a level “similar to previous international cooperation cases.”
During the Libyan crisis in 2011, when civil war disrupted global oil supplies by taking up to 1.8 million barrels a day offline, South Korea released nearly 3.5 million barrels or about 4% of the country’s oil reserves, it said.
“The South Korean government decided to participate in the US’s proposal to release oil reserve after taking into consideration of the need for international cooperation to recent sharp rise in international oil prices, the importance of the [South Korea]-US alliance, and the participation of major countries,” it said in a statement from its ministry of foreign affairs.
The UK government said in a statement it will allow companies to “voluntarily release” oil reserves of up to 1.5 million barrels, in what it called “a sensible and measured step to support global markets as we emerge from the pandemic.”
“As we’ve said before, we will work closely with our international partners to do what we can to support the global economy through the transition following the pandemic,” a government spokesperson said.
The world’s second largest economy and biggest importer of oil told CNN on Friday it was working on a strategic oil release. A spokesperson for China’s National Food and Strategic Reserves Administration said China was “pushing forward with crude oil release-related work at the moment.”
The spokesperson declined to comment on whether the move was in response to a US request to work together to tackle the supply crunch.
CNN reported last month that China doesn’t release a lot of data about its oil reserves, but said in 2017 that it had established nine major reserve bases around the country, with a combined capacity of 37.7 million tons.
Japanese Prime Minister Fumio Kishida told reporters on Saturday that the country was “considering what we can do based on our collaboration with allies,” when he was asked about the possibility of releasing oil from its reserves in conjunction with the United States and other countries.
Japan had 388 million barrels of total strategic crude oil stocks as of June 2020, according to the US Energy Information Administration. It said about 76% of those were government stocks and about 24% were commercial.
The prospect of the United States, and other big energy consumers, releasing emergency barrels has already helped to deliver lower oil prices, at least in the short term. After topping $85 a barrel in late October, US oil prices have declined about 10%. That in turn has helped put a lid on surging gasoline prices.
The attempt at coordination follows a decision by OPEC+ to ignore calls to accelerate the pace at which the group is restoring supplies cut at the peak of the pandemic.
—CNN’s Beijing bureau, Manveena Suri, Emiko Jozuka and Yoonjung Seo contributed to this report.
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