US President Joe Biden has ordered the use of large amounts of US oil reserves in an effort to cut high fuel costs.
Biden decided to release up to 180 million barrels of oil over six months, an unprecedented move in the United States.
Oil prices fell after reports of the move, aimed at easing a supply crisis sparked by the war in Ukraine, were announced.
But analysts say it is unlikely that the release of around 1 million barrels per day will fully solve the crisis.
Biden promised to take more measures to boost US production, saying that the use of the reserve “will serve as a bridge until the end of the year when domestic production rises.”
He called on companies to pay additional amounts if they choose not to use oil wells in the lands they lease from the government, in addition to investments to accelerate the adoption of greener energy sources.
High fuel costs have become a major political issue around the world, including in the United States, which is holding mid-term elections in November.
Biden said the decision to use the Strategic Petroleum Reserve was “unprecedented”.
Thursday’s announcement marks the third time in six months that Biden has tapped into US crude oil stocks.
But it is unlikely that the use of oil reserves in this way will be sufficient to compensate for the lost supplies from Russia, the second largest oil exporter in the world after Saudi Arabia.
“While the use of reserves will help control prices in the short term, an increase in global production is required to bring about a sustained decline in prices,” said Edward Gardner, chief economist at Capital Economics.
Brent crude, the global benchmark for oil prices, reached $139 a barrel in March after the start of the war in Ukraine and the imposition of sanctions on Moscow.
Energy prices have since fallen, but oil is still nearly 70% higher than it was a year ago.
picture released, Archyde.com
Global energy demand was rising before the war, when economies began to reopen as coronavirus lockdowns eased.
However, the war in Ukraine has raised concerns about supply problems, with warnings that Russian oil exports could drop by as much as 3 million barrels per day.
Most of the major energy producing countries are using their full capacity or are unwilling to increase production.
The Organization of the Petroleum Exporting Countries and its allies, including Russia, on Thursday confirmed their commitment to their current agreement to gradually increase production.
The decision came despite pressure from the United States on members of the group of oil-producing countries to increase production.
The International Energy Agency has called an emergency meeting, but it is unclear whether other countries, including Britain, France, Germany and Japan, will follow the United States by releasing oil reserves.
Biden said he was coordinating with Western countries on releasing stocks, and expected them to release another 30-50 million barrels.
On Thursday, Japan said it would take emergency measures to secure supplies of seven strategic items it relies heavily on from Russia or Ukraine, where war and sanctions have caused supply disruptions.
Japan’s industry minister said the measures include government support to boost domestic production and alternative procurement and help with technological developments to reduce the use of materials, including liquefied natural gas and gases used to make computer chips.