US President Joe Biden has ordered a major release of oil from America’s reserves in an effort to bring down high fuel costs.
The release of up to 180m barrels of oil over six months is the largest since the reserve was created in 1974.
Oil prices dropped on reports of the move, which is aimed at easing a supply crunch sparked by war in Ukraine.
But the release – of about 1m barrels a day – is unlikely to fully resolve the energy crisis, analysts say.
Mr Biden promised further action to boost US output, saying the release would “serve as [a] bridge until the end of the year when domestic production ramps up”.
He called for companies to pay extra if they choose not to use oil wells on land they lease from the government, as well as investments to speed up the adoption of greener energy sources.
Following Mr Biden’s remarks, US oil benchmark West Texas Intermediate was more than 7% lower at about $100 a barrel, while Brent Crude fell roughly 5.4% to around $107.
The soaring cost of fuel has become a major political issue around the world, including in the US, which hosts mid-term elections in November.
Mr Biden said the scale of the release from the Strategic Petroleum Reserve – which together amounts to less than two days of global consumption – was “unprecedented”.
Thursday’s announcement marked the third time in six months Mr Biden has moved to draw down America’s crude oil stockpiles
But the release of additional reserves is unlikely to be enough to compensate for lost supplies from Russia – the world’s second-biggest oil exporter after Saudi Arabia.
“While stock releases will help to keep a lid on prices in the short term, we think it will take an increase in global production to spark a sustained fall in prices,” said Edward Gardner, commodities economist at Capital Economics.
Brent crude – the global benchmark for oil prices – hit $139 a barrel earlier this month after Russia’s invasion of Ukraine and sanctions slapped on Moscow by the US and its allies.
Energy prices have fallen back since then, but oil is still almost 70% higher than it was a year ago.
Global demand for energy had been rising prior to Russia’s invasion of Ukraine as economies started to reopen as coronavirus lockdown measures were relaxed.
However, the war in Ukraine has raised fears of supply issues, with warnings that Russian oil exports could fall by as much as 3m barrels a day.
Most major energy-producing nations are either at full capacity or are unwilling to increase output.
On Thursday, the Organization of the Petroleum Exporting Countries (Opec) and its allies, including Russia, confirmed they were sticking to their existing deal to gradually increase production.
The decision came despite pressure from the US, UK and others on members of the group of oil producing nations to boost output.
“The consensus on the outlook pointed to a well-balanced market,” the group said.
“Current volatility is not caused by fundamentals, but by ongoing geopolitical developments.”
The International Energy Agency (IEA) has called an emergency meeting but it is unclear whether other countries, including the UK, France, Germany and Japan, will follow the US by releasing oil reserves.
Mr Biden said he was coordinating with Western nations on the release of the stockpiles and expected them to release another 30 to 50 million barrels.
Also on Thursday, Japan said that it would take emergency measures to secure supplies of seven strategic materials it relies on heavily from Russia or Ukraine as the war and sanctions cause disruptions to supplies.
The country’s industry minister said the actions include government support to boost domestic production, alternative procurement and to help technological developments to reduce use of the materials, which include liquefied natural gas and gases used in computer chip-making.(BBC)
•PHOTO: Joe Biden