Joe Biden has pulled out heavy artillery to counter rising oil and gas prices.

The American president decided, Thursday, March 31, to dip massively into American strategic oil reserves, in order to put one million barrels a day on the market for six months.

In all, the United States will release 180 million barrels of oil that have been dormant until now in the many salt mines in Texas and Louisiana, used to store emergency stocks of black gold.

Unheard of since the formation of these strategic reserves in the 1970s.

It's a lot of oil and a little at the same time 

“This is a time of peril for the world, and painful pump prices for American families […]. If we want to lower gas prices, we need to increase the supplies of oil available,” he said. claimed Joe Biden to justify his unprecedented use of strategic reserves.

The war in Ukraine has accelerated the rise in oil prices that has been taking place for several months.

Russia's ostracism on the international stage has raised fears that the country - the world's second largest exporter of crude oil behind Saudi Arabia in 2021 - is no longer supplying the international market with its crude.

The American ban on importing Russian hydrocarbons has only accentuated this upward trend.

This is not the first time that Joe Biden has drawn the weapon of strategic reserves in an attempt to contain soaring oil prices.

He had already done so before the war in Ukraine in November, and again at the beginning of March.

Washington had thus put 80 million barrels of crude on the market… Without noticeable effect on oil prices.

But this time, the tenant of the White House hopes that the scale of its energy effort will be enough to calm the markets.

The latter seemed receptive, as the price of Brent fell 5% just after Joe Biden's announcement.

Be careful, however, not to rely too much on very short-term price movements, "because there is also the effect of speculation which intervenes", recalls Olivier Appert, adviser at the energy and climate center of the French Institute. des relations internationales (Ifri), contacted by France 24. This expert remains more circumspect about Joe Biden's ability to stem the upward trend in the price of oil thanks to the weapon of strategic reserves.

Admittedly, "these are very large quantities that will be put on the market, but they remain modest, since they represent only 1% of daily world oil consumption, and barely 10% of the daily production of Russia," he said.

A weapon to deal with emergencies

It is therefore rather a big drop in an ocean of needs.

The million barrels of American crude per day will be far from enough if the pessimistic forecasts of the International Energy Agency (IEA) come true.

This organization provides, in fact, that the quantity of black gold supplied by Russia to the world could drop by 3 million barrels per day, because of international sanctions, underlines the Financial Times. 

If the use of strategic reserves may not be as effective as Joe Biden may hope, it may also be because these stocks were not designed for this type of use, explains the Wall Street Journal .

"These are reserves to be mobilized in the event of an emergency, natural disasters or unforeseen one-off events", continues the American daily. 

In the past, Washington drew on these reserves mainly at the time of the first Gulf War (1991), during the passage of Hurricane Katrina (2005) and at the height of the Arab Spring (in 2011).

The Biden administration wants to believe that the Russian invasion of Ukraine is one of those one-time events that drives up oil prices.

But that's only part of the story.

"There is certainly a cyclical shock with this war, but the rise in oil prices started before and corresponds to a structural change in the market", assures Olivier Appert. 

It dates back to 2014. “Investment in oil has been halved since that date. Firstly because in 2014, prices collapsed after a disagreement between the countries of the Organization of the Petroleum Exporting Countries ( OPEC) + [OPEC countries and Russia] which has prompted large groups to reduce their investments and then because there is pressure to depend less on fossil fuels", details this expert.

The consequence of this decline in investment is declining production and lagging oil supply when demand increases, resulting in rising prices.

Arm wrestling with OPEC

The problem with strategic reserves is that they "are used once and then you have to fill them again", recalls Olivier Appert.

In other words: as soon as the United States buys back oil to replenish its emergency stocks – and Joe Biden has already announced that he will do so – the wild price ride can start again. 

The American president is also aware of the limits of his energy weapon.

“It is an emergency bridge that we are putting in place while waiting for oil production capacities to increase,” said Joe Biden.

But who will do it?

OPEC would have the means.

“[Washington] took steps to ask the members of this organization to produce more oil, but the United States received a dismissal,” recalls Olivier Appert.

The same day that Joe Biden announced his intention to draw on strategic reserves, the OPEC countries announced that they had agreed to a minimum increase in the production of black gold. 

This recourse to strategic reserves is also a way for Joe Biden to engage in a standoff with the OPEC countries.

The American president "recognizes that Saudi Arabia and the United Arab Emirates - two traditional allies of Washington and influential members of OPEC - do not want to help him fight rising prices", underlines the Financial Times.

He therefore decided to act unilaterally.

In the absence of OPEC support, Joe Biden also called on American shale oil producers to produce more.

"There are too many companies [in the United States] that don't do enough, and prefer to reap the profits from high gas prices without investing in production," he said.

The White House has even threatened the producers who would not impose more financial sanctions… But "for the moment, it has been met with a refusal", notes the Wall Street Journal.

For Joe Biden, this massive recourse to strategic reserves is a very risky bet.

Once the 180 million barrels of crude have been put on the market, there will only be about 350 million barrels of oil left in these emergency reserves... This is very little, because the member countries of the IEA are obliged to always have at least the equivalent of ninety days of oil consumption in reserve, which corresponds to 315 million barrels for the United States.

“There will be almost nothing left to deal with another emergency,” notes the Washington Post.

But the American president has little choice.

If OPEC won't help him, if domestic oil producers seem to be turning a deaf ear, Joe Biden must act to try to bring prices down before next November… And the midterm elections.

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