The Biden administration’s plan to buy crude to refill the Strategic Petroleum Reserve...
DETROIT, MI - SEPTEMBER 14: U.S. President Joe Biden speaks at the North American International Auto Show on September 14, 2022 in Detroit, Michigan. Biden announced a $900 million investment in electric vehicle infrastructure on the national highway system in 35 states. The phrase oil market should always come with a “*”. Oil’s history is a succession of long periods where some actor sought to control prices, punctuated by occasional periods of free-for-all .
The novel aspect of this new approach to the SPR is the signaling of an effective put in oil prices . This is explicitly a bone thrown to U.S. oil producers, as the White House laid out in July: Contradictions abound. Biden has sought to slow drilling and launched verbal volleys at the oil industry for profiteering. Yet he has also sought to encourage oil production, including with these fixed-price purchase proposals, and, in releasing strategic barrels, ease pump prices even as he tries to foster a switch to electric vehicles.
More importantly, the US will have joined Saudi Arabia in explicitly attempting to manage the oil market with the release or withdrawal of liquidity . China, too, as it happens, which has this past decade also put a floor under the market by filling its own strategic reserve when prices softened, although not explicitly as a favor to domestic producers.In a way, shale producers should find at least one thing to like about this approach.
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