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MOSCOW, December 10, Nadezhda Sarapina. To contain rising fuel prices, the United States has used up more than 40 percent of its strategic oil reserve. This has not happened for 30 years, and it will take years to restore reserves, reports the Oil and Gas Industry Association. It will not be possible to cope through domestic production; we cannot do without imports. While purchases are being discussed, there is a high risk of supply disruptions.
Battle for the electorate
Sanctions policies and the refusal of Russian oil have inflated world prices. “Last spring, the United States and Europe stopped purchasing, and Moscow had to temporarily reduce production. Quotes instantly jumped to $120 per barrel,” recalls Igor Yushkov, a leading expert at the National Energy Security Fund. Gasoline in the USA immediately set a historical record. The national average for a gallon was $4.60, and in some states, such as California, it was over $6.
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“Unlike Russia, in America, fuel is very dependent on oil prices, and the slightest change is acutely felt. In addition, in the States, almost everything is transported by road. The cost of gasoline and diesel affects not only motorists, but also all goods,” — explains Yushkov. As a result, inflation began to rise. The price of a package of eggs reached 12 dollars, a loaf of bread — up to ten. To curb the depreciation of the national currency, the Federal Reserve raised the key rate, the cost of servicing loans sharply increased, and a wave of bank bankruptcies erupted. At the same time, Washington continued to sponsor Ukraine.
The president's approval rating has dropped to 37%. Citizens were extremely concerned; at gas stations they pasted up images of the head of state indicating the price of fuel, with the caption “I did it.” Republican statements added fuel to the fire. «Miss me already?» — Donald Trump sneered. Under his rule, a gallon of gasoline cost about two dollars. To somehow contain popular discontent, the Biden administration tried to bring down tariffs by releasing additional volumes from the country's reserves onto the market. The American leader signed a decree obliging the Ministry of Energy to sell one million barrels per day for 180 days. This is how the Democrats hoped to survive the election cycle.
For a rainy day
The United States primarily uses heavy, sour crude oil, but does not produce it itself. We have to export and stockpile just in case. Americans remember how they were deprived of fuel in 1973, when the Arab states turned off the valve to countries that supported Israel in the conflict. As experts note, then it became clear how valuable this resource is — without gasoline, diesel and fuel oil, all industries stop. Since then, large storage facilities have been allocated for strategic reserves, which will allow the country to survive autonomously for several months.
Biden's team has spent 40% of its emergency reserves in a year. This drew harsh criticism from Republicans. They also wondered what to do in the event of a natural disaster or war. Moreover, this did not solve the problem, and the rapid depletion of reserves will result in an even greater rise in the price of “black gold” in the future, create risks of physical supply disruptions and threaten a new round of inflation, explains fuel market expert Anastasia Bunina.
Now the States are trying to correct the situation. Deputy Energy Minister David Turk promised to purchase oil whenever possible. “Our goal is to provide taxpayers with a good deal,” he said. “We have been replenishing reserves whenever prices allow for several months now, and we will continue to do so.”
At the end of November, the agency reported the purchase of 2.7 million barrels at an average price of $79. By comparison, oil from reserves was selling for about $95 a barrel. The Ministry of Energy called the deal profitable. It was possible to carry it out thanks to seasonality — in the Northern Hemisphere, road transport is more actively used from April to October, analysts note. Now Washington is creating increased demand, prices will rise again and purchases will stop, and OPEC+ countries are planning additional production cuts. As a result, recovery will take a very long time.
There will be no perestroika
Among the main suppliers are Canada and Mexico, then the Middle East, a small part is purchased in Africa, says Igor Yushkov. Previously, they also purchased from Venezuela, but in 2019, Washington accused Nicolas Maduro of election fraud and imposed an oil embargo. Then Russia replaced the missing volumes.
Oil refineries (refineries) in the United States specialize in heavy oil. “It has a high density and is intended for the production of aviation kerosene, gasoline, and asphalt,” explains Bunina.
Americans have their own oil, but it is unsuitable for domestic use. “This is a very light, low-sulfur substance, the so-called shale oil, very close to gas concentrate. Quite a lot of it is produced in the USA, but it is all exported,” Yushkov clarifies.
It is not possible to switch to internal resources it will be too difficult and expensive. It’s easier to buy raw materials externally. Therefore, starting in 2022, Washington softened its rhetoric regarding Venezuela and lifted some of the restrictions. At the same time, the local press believes that Russian hydrocarbons continue to flow into the country.
Be that as it may, as the election race intensifies, the mistakes of the Democrats are increasingly being replicated by the Republicans. The oil disaster has already played into their hands — last year the party won back the lower house of parliament. And on the eve of the presidential elections in November 2024, the Trumpists are using all available levers to weaken the position of their opponent.