The Americans’ hope was precisely that the price at the pump would go down if the price of oil falls. The latter had to be the result of drawing on the reserves, so that there is temporarily more supply of oil on the market. In theory, that should push the price down.
Oil more expensive
China, the UK, India, South Korea and Japan have also pledged to make oil available from state reserves, bringing an additional 70 to 80 million barrels on the market.
However, that does not seem to be enough for the time being to have any real effect. North Sea oil even rose 3.3 percent in value yesterday, American oil made a price jump of 2.3 percent. Today there is hardly any movement in the price.
And so it doesn’t seem like Biden’s plan is really paying off. Analysts were immediately skeptical. ABN Amro analyst Hans van Cleef told RTL Z yesterday that the effect of releasing the reserves can be negated by the club of oil exporting countries (OPEC).
These countries benefit from a high price and therefore make agreements with each other about how much they pump together. In this way they ensure that there is not too much supply, which would cause the price to fall. They could decide as early as next week to extract a little less oil from the ground, in response to the American plans.
Less than a day of oil consumption
Goldman Sachs analysts call the action by the US, China, UK, India and Japan a drop in the ocean, Reuters writes. An extra 70 to 80 million barrels is less than expected in the market. It would be good for a meager $2 cut in oil prices.
And since the oil price had already fallen by about $8 in recent weeks in the run-up to Biden’s announcement, it makes sense that it is now rebounding. By the way, all the 70 million extra barrels of oil that the countries want to make available will account for less than a day’s worth of worldwide oil consumption.