The backstory:
- Before we start – just because this is a “good to know and get out of the way” fact – the Organization of the Petroleum Exporting Countries, aka OPEC, is a group of 13 countries that account for over 80% of the world’s extractable oil reserves.
- The group was formed pretty much to make sure that oil prices remained stable within global oil markets.
- Now, because these countries control most of the world’s oil reserves, they also essentially control the supply and, therefore, the pricing.
- The world is currently experiencing a tight supply of oil, which has massively pushed up oil prices and contributed to the high inflation we’re seeing globally.
- But, OPEC is refusing to tame soaring energy costs by increasing supplies, which have made countries scramble and tap into their reserves (basically, the oil kept on the side just in case – sort of a “rainy day” oil fund).
The development:
- On Thursday, oil prices surged above US$105 a barrel as Russia launched an invasion across Ukraine.
- Because oil supplies are already tight, there are fears of more disruption to energy exports and the existing limited supply.
- Biden tapped into the nation’s Strategic Petroleum Reserve (SPR) and released 50 million barrels of crude oil into the market in November of last year to ease some of the supply strain and help lower inflation.
- But the thing is, Russia is the second biggest exporter of crude oil and also the world’s largest natural gas exporter.
- So even though the West wants to punish Putin for his decision to move into Ukraine, he stated that it wouldn’t be at the cost of the American economy. And so Biden has said, “The United States will release additional barrels of oil as conditions warrant.”
- On Thursday, China was asked whether it would release oil from its own SPRs if the US needed to coordinate global oil sales to try and tame oil prices. China responded that it would only consider the move once the geopolitical situation had stabilized.
- The spokesperson for the Foreign Ministry said all countries were responsible for ensuring the stability and security of global energy supplies and should protect those two things by maintaining stable geopolitical relations.
- According to a source familiar with the talks, Biden is now in the early stages of working with countries to try and coordinate a combined sale of oil from global strategic crude reserves.
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