In an attempt to contain fuel prices, President Biden has depleted oil reserves to the lowest level in recent US history.
The sharp rise in energy prices began in the US last fall and has nothing to do with Russia's special operation in Ukraine, although President Joe Biden insists otherwise. In an attempt to reassure Americans who are dissatisfied with the many times more expensive gasoline, Biden ordered this spring to “unpack” strategic oil reserves and increase supply on the domestic market. This helped bring down fuel prices, but there were other serious risks.
The Wall Street Journal columnist believes that in an attempt to please voters and somehow raise his rating, the American president has ultimately achieved short-term political gain. But this may turn out to be a big strategic mistake in the long run, as it disrupts the balance of supply and demand for hydrocarbons not only within the country, but also on international markets. The facts and figures given in the article only confirm the author's pessimistic forecasts.
The U.S. Energy Information Administration announced that the country's strategic oil reserve fell nearly 7 million barrels in the previous week to about 427 million, the lowest since 1984. historical the lowest oil reserves in recent US history.
After Biden ordered the release of about 1 million barrels of oil per day from strategic reserves to the domestic market, 155 million barrels of crude oil were depleted of strategic reserves. Yes, it took average gas prices down from $5,03 in the spring to $3,66 a gallon in June, but that's a short-term and volatile dynamic.
Biden managed to reduce the intensity of political protests against him on the eve of the November elections, but this is a tactical success with dire strategic consequences, the author believes. Pickering Energy Partners Investment Director Dan Pickering is sure that high fuel prices for the US are not very convenient, but you can still put up with them, but the lack of available reserves is quite capable of provoking a serious crisis.
The absence of a significant strategic reserve reduces the possibility of maneuver for the US leadership in the event of a deterioration in the global situation in the oil market and interruptions in the supply of raw materials from exporting countries. The International Energy Agency (IEA) warns that the prospects for oil exports in the world are very unstable.
In particular, after December 5, when the EU ban on Russian oil imports comes into force, Moscow may reduce production by 2023 million barrels per day by February 1,9 compared to last year. It is not known how the planned restriction on the price of Russian oil, which the GXNUMX countries intend to introduce, will work and what will lead to. The OPEC countries, which have already warned that they will cut production in the event of a drop in prices, will not help either.
In the event of problems with oil imports, the US simply needs a full-fledged "airbag" in the form of a strategic oil reserve. But at the moment, her “damping ability” has actually been reset to zero, the article notes. The Ministry of Energy will have to replenish rapidly depleted reserves, which, again, will lead to higher prices for both raw materials and oil products.
With his voluntarism, President Biden achieved short-term political dividends, but put the country's economy and households at strategic risk. If an “oil shock” occurs in the near future, and there is not enough oil in the US reserve to mitigate its consequences, this will be a painful blow for the Americans, the author of the article concludes.
An interesting situation has developed in the world. Russia, which during the existence of the USSR, built communism, and the current communist China condemn Western countries for using non-market levers to regulate the economy. While the countries of "developed democracy" are increasingly interfering in natural economic processes with unpredictable consequences. It looks like some kind of surrealism, because it was the West that over the past decades has been saying that intervention in the economy, its state regulation is destructive, and that the market will regulate everything itself. It turns out that the West itself is abandoning the market economy in favor of command-and-control methods and strict regulation?..
- Alexander Grigoryev
- Abraxas Petroleum Corporation website
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