The administration under Biden has questioned some of the world’s largest nations that are consumers of oil which includes India, Japan, and China to consider releasing crude stockpiles in an effort to bring down global energy prices according to a few people familiar with the matter.
The unusual request comes as Joe Biden, the president of the US fends off the pressure from politics over the rising prices and other costs by consumers driven by a rebound in the activity of the economy from lows plumbed early in the COVID-19 pandemic.
It also shows the frustration of the US with members of the Organization of the Petroleum Exporting Countries and its allies who have been requesting repeatedly from Washington to increase their production.
One of the sources said that “We’re talking about the symbolism of the largest consumers of the world sending a message to OPEC that ‘you’ve got to change your behavior.”
China is said to be working on a crude release in Asia where oil prices extended declines promoted by the request of the US after settling on Wednesday by below seven-years highs struck in early October.
Biden and top aides have decided the possibility of a release that is coordinated release of stockpiled oil with the close allies which includes Japan, South Korea, and India as well as with China over the past several weeks, as stated by the sources.
The US and allies have coordinated strategic petroleum reserve releases before, for instance in 2011 during a war in OPEC member Libya.
But the latest proposal represents that an unprecedented challenge to OPEC which is the cartel that has influenced the prices of the oil for more than five decades as because it involves China which is the world’s biggest importer of crude.
A Japanese industry ministry official stated that, “the United States has requested Tokyo’s cooperation in dealing with higher oil prices, but he could not confirm whether the request included coordinated releases of stockpiles. By law, Japan cannot use reserve releases to lower prices.”
No comment was given by a senior cabinet officer.
China’s state reserve bureau said, “It was working on a release of crude oil reserves although it declined to comment on the U.S. request. A South Korean official confirmed the United States had asked Seoul to release some oil reserves.”
The official said, “We are thoroughly reviewing the U.S. request, however, we do not release oil reserve because of rising oil prices. We could release oil reserve in case of supply imbalance, but not to respond to rising oil prices.”
The SPR was being set up in the 1970s after the Arab Oil Embargo which ensures the US has enough supply to bring out an emergency.
Many people familiar with the matter that has cautioned the negotiations over a supply release which have not been finalised nor there has been any final decision has been made about if any specific course of actions is made on oil prices.
The White House totally declined to make any comments on the detailed content of conversations with any other countries.
After Reuters reported on the White House discussions, ‘U.S. crude and global benchmark Brent slumped, with the latter dropping below $80 a barrel.’
OPEC and other producers include Russia which known collectively as OPEC+ which have been going on adding around 400,000 barrels per day to the market on a monthly basis but have also resisted Biden’s calls for the increases, arguing the change in demand which could be fragile.
OPEC Secretary General Mohammad Barkindo said that he expected a global supply surplus to emerge as soon as December on Tuesday.
He told reporters, “These are signals that we have to be very, very careful.”
The rise in oil prices have annoyed Biden before the 2022 midterm elections which will decide whether his Democratic party will maintain majorities in the U.S. Congress.
According to AAA, “U.S. gasoline prices average $3.41 per gallon recently”, and also “more than 60% higher than a year ago as the economy has rebounded from the COVID-19 pandemic.”
Many of the aides of Biden has attributed in failing public approval ratings in latest months to worsen the inflation from food to energy and several other areas. The consumer price index is now up 6.2% over the last 12 months, with its components of energy up 30%.
The Paris-based International Energy Agency which monitors national SPRs for members that include the U.S. Japan and most western countries decided not to comment. The IEA in the past has coordinated releases involving several countries.