Oil prices topped $ 82 a barrel on Tuesday morning after the Biden administration announced that the United States and other countries would release tens of millions of barrels of oil from reserves as part of a ploy to to reduce prices.
The price of Brent Sweet Crude, the global benchmark, rose more than 3.3% following news that the United States would release 50 million barrels of strategic oil reserves. China, India, South Korea, Japan and Britain are also planning to release reserves, the White House said.
The price of West Texas Intermediate jumped more than 2.5% to $ 78.47.
The Biden administration hopes that the release of the reserve will lower the price of gasoline and fight inflation, which has become a major economic and political puzzle for the administration. The White House and the Federal Reserve said earlier this year that inflation was transient and would remain confined to a few areas of the economy, forecasts that have proven to be grossly wrong as inflation has become widespread, has reached its fastest pace in decades and appears to be accelerating further.
Today, I am announcing measures to reduce the cost of gas and oil for American families.
The Department of Energy will release 50 million barrels of oil from the Strategic Oil Reserve to lower gas and oil prices for Americans.
– President Biden (@POTUS) 23 November 2021
U.S. reserves can only be released at a maximum rate of 4.4 million barrels per day, according to the Congressional Research Service, due to constraints on pipelines and marine terminals. Total world consumption is around 100 million barrels per day. Oil industry experts say the release of reserves is unlikely to exert significant downward pressure on prices, doing little to ease the price pressures created by underinvestment in US production in the face of the political pressure from climate activists.
Some oil traders say the release is largely symbolic because the United States had previously planned to sell oil from reserves as part of the deficit reduction allowed by Congress in legislation earlier this year.
At least one member of the Biden administration has expressed doubts about the effectiveness of the release. Stephen Nalley, the acting administrator of the US Energy Information Administration, recently told a Senate panel that “the magnitude of the impact [of a reserve release] would be relatively short-lived.