USA, India Open Strategic Petroleum Reserves Amid Mounting Pressure to Tame Energy Costs
- 24-Nov-2021 12:35 PM
- Journalist: Nicholas Seifield
In order to tackle the horrendously rising international energy prices, USA President Joe Biden, on Tuesday, bade release of 50 million barrels of crude oil from the country’s Strategic Petroleum Reserve. Out of the total released volume, 32 million barrels will be dispersed throughout the coming months which will be refilled in the reserve later while the remaining 18 million barrels will be sold out through a Congressional strategized state auction.
Alike other regions of the world, the USA is witnessing a tumult driven by skyrocketing fuel prices since the third quarter of 2021. For instance, gasoline prices which currently averages USD 3.40 per gallon in the USA have multiplied to over twice the price that was recorded last year.
The USA’s decision of emancipating reserve oil came immediately after India announced to release 5 million barrels of crude oil from its reserves. The released oil in India will be supplied through the pipelines to Mangalore Refinery and Petrochemicals Ltd (MRPL) and Hindustan Petroleum Corp Ltd (HPCL) at undisclosed prices.
Strategic Petroleum Reserve contains the emergency crude oil stocks maintained by the governments so that they could be utilized in case of threat to national security, disruption by natural disasters, or during other crucial circumstances. The decision taken by the two major countries aims to establish an equilibrium with other energy-intensive nations which includes China, Japan, South Korea, and the United Kingdom who will be parallelly mirroring this move.
Crude oil, which is a hydrocarbon-rich liquid fuel residing in deep reservoirs under the Earth’s crust, is collected using the drilling process and refined to form extremely important fuels like gasoline, diesel, heating oil etc., which are used in powering transport, generating electricity and heating purposes. Crude oil is also a major feedstock for the production of various grades of plastics, petrochemicals, speciality chemicals, fertilizers and pharmaceutical products.
As per ChemAnalyst, the globally rising oil prices backed by the strong crude oil demand in the end-user industries post-pandemic recovery have become a major concern as it is disrupting all forms of businesses which in turn is causing a slowdown of economies. The decision by major countries to release state-reserve oil in a synchronized fashion is a well-planned strategy that is expected to cool down the firing up crude oil prices in the international market by relieving crude oil supply pressure in the downstream sectors. The decision, very importantly, marks the unity of the participating countries coming together to combat a crisis situation with a holistic approach.