Washington, DC – When Joe Biden announced that the United States would release more than 180 million barrels of oil from its strategic oil reserves over the next six months, the U.S. president described it as a historic step that would lower U.S. fuel prices.
The price of the pump has risen amid Russia’s war in Ukraine, prompting the United States and other countries to ban oil and gas imports from Moscow and raising concerns about global energy supplies with low reserves and limited new production capacity.
As of early this week, Europe, Japan and others are expected to join the U.S. in releasing their stocks, adding to the world market about 30 to 50 million barrels over the same six-month period.
But while the conflict in Ukraine is pushing Biden and other world leaders to plunge into their reserves, experts say the actual effect on consumers will be limited – and there will be higher prices and new failures ahead. This is because, given global demand and supply prices, barrels of Russian oil leaving the market far exceed what is returned by the US and other countries.
“The Biden administration still understands that as long as we have problems with Russia, oil prices are rising,” said Robert McNally, president of Rapidan Energy Group, a consulting firm in Washington.
“This is a big problem. This will keep oil prices high and thus raise prices high and up, ”said McNally, a former energy adviser to President George W. Bush.
McNally told Al Jazeera that the situation could prove to be politically costly for Biden, who came to office promising to give up fossil fuels but is now facing a sharp rise in fuel prices amid rising inflation in the US.
“The next priority of any official in Washington is always the next election. These guys are afraid of gasoline prices, ”McNally said. “It’s just elementary but tough math of the oil market and political survival.”
According to the International Energy Agency (IEA), Russia is the world’s third largest oil producer, exporting 5 million barrels of oil per day, which is about 12 percent of the world market. About 60 percent of Russian oil goes to Europe and 20 percent to China, according to the IEA.
The agency also estimated that sanctions and decisions by the private sector not to buy in Russia would lead to the withdrawal from the world market of 2.85 million barrels of Russian oil a day. McNally and others estimate that the reduction in supplies will be even higher – about 3 million barrels per day.
“Just as the oil economy works, you have goods at world prices. So failure everywhere affects price everywhere, ”said David Goldwin, head of Goldwyn Global Strategies and a former political adviser to the Obama administration. “It’s a problem Biden is trying to fix.”
As the Russian-Ukrainian crisis unfolded, representatives of the Biden administration asked domestic American producers and the Organization of the Petroleum Exporting Countries (OPEC) to increase production. Both were denied.
In the U.S., most producers are already included in long-term production plans, and the industry is still recovering after the fall in oil prices in 2020 caused by the COVID-19 pandemic.
For their part, 13 OPEC countries, cutting production in response to the slowdown in the pandemic, are adhering to their difficult 2021 agreement, which provides for an increase in supplies by 400,000 barrels per month.
“This is a deal they have made and they want to hold everyone back to that deal. They are giving up all pressure to get away from it, going faster, ”McNally said.
Switch to renewable energy
When Biden announced the release of U.S. oil reserves last week, he issued a second order facilitating the extraction of minerals and metals needed to produce electric vehicles – lithium, nickel, cobalt.
The move sends a signal that the president, who ran for office in 2020, promising to cut back on fossil fuel consumption and switch to cleaner energy sources, is still seeking to divert the U.S. economy from oil dependence.
But with rising inflation and rising gas prices, he faces tough political realities ahead of the November by-elections if he wants to keep those promises.
“Most voters are really more worried here and now. And with rising gas prices, they are focusing less on carbon emissions and more on how much their wallets are hurting, ”said Al Jazeera Lee Oganyan, a professor of economics at the University of California, Los Angeles. “Biden walks the tightrope.”
However, environmentalists and other experts say that the war in Ukraine should hasten this energy transition, not hinder it.
“This crisis is a clear sign that we cannot depend solely on oil and gas, solely on fossil fuels. There is a clear need for renewable energy – wind and solar, “said Maria Ivanova, a professor of global governance at the University of Massachusetts at Boston.
Biden’s first act as president in 2021 was to return the United States to the Paris Climate Agreement, and he proposed extensive measures in the United States to stimulate the development of electric vehicles – most of which have not yet been adopted by Congress.
But his recent drive to increase domestic production amid the war in Ukraine means a “significant turnaround” from those positions, Ivanova told Al Jazeera.
Although she said that according to the need to use oil reserves and encourage more production, she urged Biden not to give up the push for renewable energy. “We need a fundamental rethinking of our economic system, and I don’t think a return to oil and gas will work.”