Analysis: US Strategic Oil Sale Speeds Fuel-price Fix, But at What Cost?

“I think it’s extremely cowboy-ish ... by doing an outright sale, purely thinking like a trader, if I did that I would get fired. Nobody knows which way the oil price will go,” said Ilia Bouchouev, partner at Pentathlon Investments and adjunct professor at NYU.

Timothy Gardner, Julia Payne and Ahmad Ghaddar, Reuters

The Biden administration is selling a record amount of emergency oil from national reserves to tame soaring U.S. fuel prices as quickly as possible, but the plan could backfire down the road if the stockpile is not replenished quickly.

President Joe Biden on March 31 announced the U.S. would sell 180 million barrels of crude from the Strategic Petroleum Reserve (SPR) at a rate of 1 million bbl/d starting in May, the biggest release from the stockpile since it was created in the 1970s. Country members of the International Energy Agency (IEA) are releasing an additional 60 million barrels to tame global prices.

The decision to sell oil from the SPR, instead of working out a loan, also known as an exchange, marked a tradeoff: oil would be released to the market more quickly to lower prices, but it could take longer to replenish the stockpile to its current level, raising longer-term market risks. Some analysts warned it could make oil prices more volatile.

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