US President Joe Biden announced plans to use oil from the country's strategic reserves to lower domestic fuel prices.

This is stated in a press release on the White House website.

"The president today announces that the Department of Energy will provide access to 50 million barrels of oil from the strategic oil reserve to lower prices for Americans and close the mismatch between demand emerging from the pandemic and supply," it said.

As the Biden administration noted, US consumers are feeling the impact of rising fuel prices "at gas stations and on their home heating bills," as are American businesses.

The reason for this is that the supply of oil is not keeping up with demand against the backdrop of the global economy recovering from the pandemic, according to Washington.

Against this background, in the next few months, the United States is going to release 32 million barrels of oil, and then another 18 million. Moreover, as the White House stressed, China, India, Japan, the Republic of Korea and the United Kingdom will use raw materials from the reserves together with the United States. ...

“The US is guided by the need to improve the rating of support for the administration of the newly elected president among the population.

Now gasoline prices in the States have risen to $ 3.5 per gallon, although under Trump this value did not exceed $ 3, "Vitaly Gromadin, asset manager at BCS World of Investments, told RT.

It is noteworthy that Donald Trump himself criticized the decision of the current head of the White House.

According to the former US president, a year ago, the United States remained energetically independent, and today it is "in the power of OPEC."

"These reserves are intended for use in such serious emergencies as war, and under no other," - quoted TASS Trump.

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  • © Pavel Mikheyev

Note that in early November Joe Biden accused Russia and the OPEC countries of unwillingness to increase oil production.

According to him, the actions of the alliance have become one of the main reasons for the rise in fuel prices.

At the same time, White House press secretary Jen Psaki announced Washington's intentions to put pressure on OPEC to bring prices down.

Recall that Russia and 22 other oil-producing countries are members of the OPEC + alliance.

As part of the deal, the states jointly control the production of energy resources to achieve a balance between supply and demand in the global hydrocarbon market.

Such a policy should keep oil prices from sharp fluctuations.

Now, against the backdrop of the recovery of the world economy and global demand for energy resources, the OPEC + countries are gradually increasing their hydrocarbon production - by 400 thousand barrels per day per month.

However, as experts believe, in the United States, such a volume of production increase is considered insufficient, so they decided to use their own reserves and involve several more large states in the initiative.

“The USA and China are the two main players in the market.

The rest of the countries represented by India, Japan, Korea and Great Britain are unlikely to be able to offer significant volumes for sale and are needed, rather, for weight.

At the same time, as far as China is concerned, the republic has previously sold oil to the market from strategic reserves, ”said Vitaly Gromadin.

The root of the problem

As the analyst of FG Finam Andrey Maslov told RT, high gasoline prices in the United States led to problems with supplies in the country and disruptions to supply chains.

Moreover, according to the expert, the current state of affairs, along with the general acceleration of inflation, is painfully perceived by taxpayers.

Note that in October, annual inflation in the United States was 6.2%.

The achieved growth rates of consumer prices became the highest since 1990.

According to Andrey Maslov, the decision of the current administration to free oil from reserves may, to a certain extent, affect the cost of gasoline in the country, but will not solve the problem with inflation.

“The actions of the administration, in theory, could slow the rise in fuel prices.

Nevertheless, in order to fight inflation, it is necessary to normalize monetary policy by the FRS, which is scheduled for 2022, ”Maslov explained.

Recall that in 2020, against the backdrop of the coronavirus pandemic, the US Federal Reserve reduced the interest rate to almost zero and launched a quantitative easing program.

The Fed began printing dollars and buying government bonds on the stock market.

Such a policy was supposed to lead to an increase in the money supply in the financial system and accelerate the economic recovery after the crisis.

At the same time, as experts note, it was the actions of the Federal Reserve that became one of the main reasons for the acceleration of inflation in the United States.

Reverse effect

It is curious that investors were preparing in advance for the US decision to free oil from reserves.

So, on the eve of the cost of raw materials on world exchanges has dropped significantly.

During trading on November 22, the price of a barrel of the benchmark Brent crude fell below $ 77.6.

At the same time, American WTI fell in price to 74.7 per barrel.

Values ​​are the lowest since early October.

At the same time, after Joe Biden's announcement of the use of strategic reserves, oil prices, on the contrary, began to rise rapidly.

On the evening of November 23, a barrel of Brent rose more than 3.3% - to $ 82.4, while WTI quotes rose 2.6% - to $ 78.7.

“The volumes announced by the US were clearly smaller in scale than market participants had feared.

Therefore, we can expect the return of Brent prices back to the range of $ 80-85 per barrel.

We do not exclude that this price corridor will remain until the end of the year, ”Vitaly Gromadin believes.

At the same time, Andrey Maslov does not exclude that quotations may drop to $ 75 per barrel.

However, this level of prices suits Russia and most of the OPEC + countries, the analyst emphasized.

Moreover, in his opinion, in response to the actions of the United States, the alliance members may abandon the planned increase in production by 400 thousand barrels per day per month and thereby provide additional support to prices.

As the leading strategist of EXANTE, Janis Kivkulis, suggested in a conversation with RT, in the long term, the dynamics of oil prices will largely depend on demand and the volume of investments in the industry.

At the same time, such interventions as the use of strategic reserves can only have a temporary effect on the market, the specialist is sure.

“The relevance of such interventions also plays an important role.

We have seen that oil has already been getting cheaper over the past four weeks, and rumors about the release of reserves only increased this pressure.

In the end, investors' expectations were not met, and prices turned to growth.

Now the question arises whether the US has done itself and other oil consumers a disservice, ”Kivkulis concluded.