Biden orders unprecedented release of oil inventories to lower price

US President Joe Biden will on Thursday announce the release of one million barrels of oil a day from its strategic reserves for six months in a bid to lower the price, the White House said.

“Following consultations with allies and partners, the President will announce the largest release of reserves in history, placing an additional one million barrels per day daily for the next six months,” the statement said.

“The magnitude is unprecedented: never in the world have reserves been dumped (into the market) at a rate of one million barrels a day for so long. This record release will provide historic value to bridge the gap until the end of the year, when domestic production increases”, adds the note.

The move will dump a significant amount of overheated oil onto the global market, which has set off waves of inflation.

Fighting against bad poll data and with legislative elections in which the opposition is emerging as the favorite to regain control of Congress, the White House is trying to show that Biden has a solution to a problem born in the pandemic and amplified by the war in Ukraine.

Releasing reserves would be equivalent to increasing world supply by about 1%.

Oil fell sharply after the first information about the US plan, shortly after OPEC+ decided to modestly increase production, ignoring calls to relieve price pressure caused by the war in Ukraine.

The release of US oil will lessen previous uses of strategic reserves announced by Biden simultaneously with other countries on March 1 after the Russian invasion, and also last year, in response to rising inflation.

Despite a recovering economy and a grip on the Covid-19 pandemic, Biden receives little credit from voters, who blame him for rising prices everywhere from the supermarket to car dealerships.

The disturbances in the production chains related to the different rhythms of economic recovery in the world are part of the phenomenon of inflation.

Also behind this politically dangerous trend are fuel costs, which in turn drive up transport prices for almost all goods.

And for motorists, the price shock at gas stations is a constant source of irritation.

Gasoline prices are currently averaging $4.23 a gallon, up 47% from a year ago.

A barrel of WTI fell 4.6%, while Brent futures contracts, a European benchmark, fell by 5.5% to US$ 107.20.

Crude oil prices soared to nearly $140 in March on concerns over Russia, one of the world’s biggest producers, which launched an invasion of Ukraine and which has been the target of several international sanctions.

Prices have dropped slightly since the US banned Russian imports on March 8, but have hovered around $100 since then.