Draw on the strategic reserves of Petroleum is an alternative that resonates strongly in USA to lower oil prices, with a president on the defensive with inflation driven by the cost of gasoline.
However, in the midst of a commitment to climate change, the White House is weighing this rarely used strategy whose impact on the price of fuel at gas stations would be, at least, provisional.
The United States created its strategic reserves in 1975 to face oil shocks. It keeps them in huge underground deposits some 800 meters deep along the coast of the Gulf of Mexico, capped at 714 million barrels (mb).
Currently, the level of these stocks scales to 609 mb, according to the Department of Energy, something like six months of crude consumption in the country.
About 60 sunken reservoirs in a salt layer are distributed in four highly monitored sites in Louisiana and Texas.
It takes about 12 days after the president’s decision for that oil to be refined and fit for sale. It can be used to meet domestic demand or be exported.
Precedents
The law gives the US president the prerogative to use up to 30 million barrels in 60 days or more “in the event of serious power outages.”
In 1991 George H. W Bush ordered to use about 17 mb during the first Gulf War.
In 2005, his son George W. Bush ordered 11 mb to the market after Hurricane Katrina that devastated Louisiana and its oil structures.
In 2011, Barack Obama released 30 mb to supply oil from Libya.
On the contrary, in 2011, after the September 11 attacks, Bush Jr. ordered the reservoirs to be filled to the top.
Dumping these reserves into the market to lower prices could have a limited, short-term effect, estimates John Kilduff, oil market analyst at Again Capital.
“To be effective, it is necessary that the amount of reserves used is important and that there is a coordinated effort” with other countries, he stressed.
Climate change dilemma
In times of emissions reduction speeches, drawing heavily on these reserves can arouse criticism.
“It would be counterproductive in terms of the image on climate change,” recently highlighted an editorial in The Washington Post. “It is certainly a contradiction” for the Joe Biden government, Kilduff noted on his side.
“Leaders in the fight against climate change are in favor of high oil prices to allow renewables to be more competitive,” added the analyst.
But for Biden, inflation – the highest in three decades at 6.2% in the 12 months to October and heavily pressured by energy prices – could be political poison.
Fighting the price increase became imperative for the White House.
“These (price) increases affect the popularity of the president,” says Kilduff.
The average price of a gallon (3.8 liters) of gasoline rose to $ 3.41 from $ 2.12 a year ago, according to the AAA motorists association.
This level, still acceptable to drivers, becomes problematic starting at $ 4 a gallon, according to experts.
“It is a breaking point. They then spend US $ 100 to fill the tank of an SUV. That captures the attention of motorists and undermines consumer confidence, and slows the economy, “warns John Kilduff, who recalls that all recessions in the United States were preceded by a rise in oil prices.
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Ricardo is a renowned author and journalist, known for his exceptional writing on top-news stories. He currently works as a writer at the 247 News Agency, where he is known for his ability to deliver breaking news and insightful analysis on the most pressing issues of the day.
