What are the gains and losses of releasing oil reserves in many countries

[ Time:2021-11-29 | Hits:509 ]

On November 23, the United States and many other countries announced the release of oil reserves to reduce oil prices. As a result, international oil prices rose instead of falling that day. Some analysts pointed out that the ultimate goal of the US move is to alleviate inflation, but the release of reserves can only have a short-term effect. There are many reasons for inflation. I'm afraid it is difficult for the us to achieve its goal and may worsen its relationship with the organization of Petroleum Exporting Countries (OPEC).

The White House announced on November 23 that the US Department of energy will release 50 million barrels of crude oil from the strategic oil reserve to alleviate the mismatch between supply and demand and reduce oil prices. The U.S. Department of energy said that the 50 million barrels of crude oil will be put on the market as early as mid and late December, of which 18 million barrels have been approved by Congress for direct sales, and the remaining 32 million barrels belong to short-term exchange. After the oil price is stable, it is agreed to return the strategic oil reserve from 2022 to 2024.

On the same day, Japanese Prime Minister Fumio Kishida said that he would cooperate with the United States to stabilize oil prices and release the country's strategic oil reserves. According to Japanese media reports, the Japanese government is expected to release 4.2 million barrels of crude oil reserves first. The South Korean government also said on the same day that it decided to release oil reserves due to factors such as high crude oil prices and the importance of the South Korean US alliance. South Korean media said that the release scale may be the same as that in 2011, at about 3.5 million barrels.

In addition, in response to the action of the United States, India announced that it would release 5 million barrels of oil reserves, and Britain also said that it would release about 1.5 million barrels of oil reserves.

After many countries announced the release of oil reserves, international oil prices rose instead of falling on the 23rd. As of the closing of the day, the futures price of light crude oil delivered in January 2022 on the New York Mercantile Exchange rose by 2.28%, and the futures price of London Brent crude oil delivered in January 2022 rose by 3.27%.

At present, domestic inflation in the United States remains high. According to the data of the American Automobile Association, the average price of gasoline in the United States is more than 60% higher than a year ago. Data from the U.S. Department of labor also showed that the U.S. consumer price index (CPI) rose 6.2% year-on-year in October, the largest year-on-year increase since November 1990.

Many analysts pointed out that the US government released oil reserves to reduce oil prices on the one hand and alleviate domestic inflation on the other. However, international oil prices are not has the final say of the US, and there are many reasons for inflation. Whether the US move is acceptable or not remains to be seen.

Judging from the release scale announced by several countries, the total amount of crude oil entering the market will be between 60 million and 70 million barrels, while the global average daily demand for crude oil is about 100 million barrels. I'm afraid it's a drop in the bucket to rely on this release to affect oil prices. Moreover, the release is only a short-term move, which is difficult to fundamentally reverse the supply and demand state of the international crude oil market.

In terms of the causes of domestic inflation in the United States, the rise in energy prices is only one of them. Large-scale fiscal stimulus, supply chain interruption and labor shortage are all factors leading to high inflation. American experts and media generally predict that this round of inflation will continue for some time.

Analysts believe that US President Biden should also understand that the release of strategic oil reserves will not have an immediate effect, but at present, high oil prices and high inflation have become the reasons for the Republicans to attack Biden's government, and Biden must take action. In addition to releasing oil reserves, the Biden government has not relaxed its pressure on OPEC in the hope that it can increase oil production.

However, at the 22nd ministerial meeting in early November, OPEC and non OPEC oil producing countries decided to maintain the original plan of gradually increasing production. OPEC only said that it might change its production plan for the United States to jointly release oil reserves. It can be predicted that the game between the United States and OPEC over oil prices will continue when U.S. inflation has not eased.