US Release of Oil Reserves Would Be Complicated, Price Drop Short-Lived - EIA

WASHINGTON (Pakistan Point News / Sputnik - 16th November, 2021) A release of the US Strategic Petroleum Reserve to tame rallying oil markets would be complicated and may only lead to short-term price drops, the acting head of the country's energy agency said on Tuesday.

"We've done some analysis in the past and we've done some analysis recently and I think a release of the SPR can be complicated," Stephen Nalley, acting administrator of the Energy Information Administration, told a Senate hearing on the prospects of the reserve release. "Our analysis generally shows that it's pretty short-lived. A couple months after that typically, the other dynamics in the market would overtake any decrease in price."

Nalley's comments came amid growing pressure on the Biden administration to reduce gasoline prices at US pumps rallying at seven-year highs above $3.40 a gallon as the global price of crude oil itself trades near 2014 peaks at around $80 per barrel.

Crude prices have leaped more than 60% this year due to supply shortages caused by rapid US and world economic recovery from the coronavirus pandemic. One reason for the shortage is the continued squeeze on supply by the Organization of the Petroleum Exporting Countries and its allies.

The so-called OPEC+ alliance is holding back at least 5 million barrels of regular supply from global markets in continuation of production cuts that began more than a year ago to shield crude from the demand destruction caused by the pandemic.

The White House's repeated pleas for OPEC+ to add more oil to the market have only been met by a daily increase of just 400,000 barrels by the alliance. This has prompted the administration to consider a SPR release or a ban on US oil and gas exports altogether, like what the country practiced for 40 years until 2015.

Nalley aside, a large number of energy industry officials and experts have said that the SPR is best utilized for real emergency purposes such as a genuine shortage of crude from global conflicts, and a premature release might leave the United States vulnerable in such crises.

Nalley, when asked whether a ban on LNG, or liquefied natural gas, would help cool domestic gas prices, which have also been rallying, said: "It might not be wise to ban exports of LNG out of the US as it could discourage domestic production then, and send prices skyrocketing."

US natural gas prices have rallied from around $3 per million metric British thermal units last year to about $5 now.