The US President, Joe Biden, has announced that the US will release 1 million barrels of oil from its strategic oil reserve for the next six months, in a historically unrivaled move, which is set to increase oil supply in the light of recent political events, which saw a decrease in the global level of oil supply, due to sanctions placed on the Russian Federation, due to the 'special military operation' being performed in Ukraine.
This increase in oil supply would help decrease the recent rise in oil prices both domestically and internationally, as the US is a global exporter of oil (7491.36 USD Million in January 2022). According to the National Economic Council Director, there exist about 568 million barrels in the reserve, and the duration of six months was designed to afford a medium-term bridge between this period of oil scarcity, and the period at which they expect greater US production of oil to come back. Furthermore, he said that the US has been in touch with several countries, such as India, providing encouragement to participate and contribute to this act of releasing reserves.
This will, naturally, lead to a surplus of oil at current prices, allowing market forces to drive prices down, a fact that will definitely lead to a decrease in the costs of production for firms in the global economy, due to reduced transportation costs, which would then lead to increased levels of production, leading to greater levels of economic growth in all economies reliant of oil.
This is a good move for the united states. Prices are rising rapidly and people are getting frustrated. It is a warranted usage of the reserves and can strengthen our alliances with other countries by receiving their support.
ReplyDeleteI think this is a good idea to help counter rising gas prices in the economy, however I think that we need a better long term solution. I also think that oil prices will decline once the Russia and Ukraine wars dies down, creating less uncertainty in the market.
ReplyDeleteThis is not a long term solution, but will help the economy tremendously in the short run. Reduced transportation costs are much needed right now in the United States. People aren't driving as much due to the increase in prices to save their gas.
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