Biden: "High Oil Prices Are Due to Oil-Producing Countries and Oil Companies" ... Oil Prices Rise Despite Release of Strategic Reserves

Background Explanation of the Release of 50 Million Barrels from Strategic Petroleum Reserves
WTI Rises 2%

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] U.S. President Joe Biden blamed oil-producing countries and oil-related companies for the rise in oil prices and announced that he would work with allies such as South Korea to induce a drop in oil prices through the release of strategic petroleum reserves. Despite the Biden administration's proactive stance, international oil prices rose on the day, casting a shadow over the direction of oil prices.

On the 23rd (local time), President Biden spoke about the economic situation at the White House, stating, "A large part of the reason Americans are facing high gasoline prices is that oil-producing countries and major corporations have not worked to lower prices."

President Biden explained that although gasoline prices had previously soared above $3 per barrel, they overcame it, adding, "I have spoken with other world leaders facing challenges due to rising oil prices to find ways to lower oil prices." He diagnosed that high oil prices are a problem not only for the U.S. but for the entire world.

President Biden said, "The largest-ever release of strategic petroleum reserves is a way to support supply. India, Japan, South Korea, the United Kingdom, and China have also agreed to participate," adding, "This cooperation will support our efforts to address supply shortages."

That morning, the U.S., along with India, Japan, South Korea, the United Kingdom, and China, announced the release of 50 million barrels of strategic petroleum reserves.

President Biden's remarks implied that the release of strategic reserves is intended to pressure oil-producing countries such as those in the Middle East and Russia, which have not responded to calls for increased oil production.

Seemingly aware of criticism that the effect of releasing strategic reserves may be limited, President Biden did not expect oil prices to fall immediately.

He predicted, "We will not solve the high oil price problem overnight, and it will take time to see gasoline prices at the pump decrease."

Regarding the effort to increase oil production, which contrasts with policies aimed at reducing fossil fuel dependence to combat climate change, he pledged, "While we will reduce dependence on oil in the long term, right now we will do what is necessary to lower oil prices."

President Biden pointed out that the burden of oil prices is heavy on middle-class and working-class families, and noted that despite a recent roughly 10% drop in oil prices, gasoline prices at the pump have not changed significantly.

He criticized, "Gasoline prices at the pump have not changed at all. Gasoline suppliers are pocketing the price drop," claiming that Americans are paying more than 25 cents extra per gallon.

Despite President Biden's determination to induce a drop in oil prices, on the day, the January West Texas Intermediate (WTI) crude oil price on the New York Mercantile Exchange closed at $78.50 per barrel, up $1.75 (2.3%).

The Wall Street Journal evaluated that even if oil prices fall due to the release of strategic reserves, the global economy is expected to continue recovering, and demand is expected to keep increasing next year, so the effect may be only short-term.

Bjørn Tonhaugen, Head of Oil Market Research at Rystad Energy, explained, "The effect of the release of strategic reserves will occur with a significant time lag and may not occur at all."

This means that unless the Organization of the Petroleum Exporting Countries (OPEC) Plus (+) increases oil production, the oil supply shortage cannot be completely resolved.