US oil inventories fall to 30-year low for the year
To curb rising fuel prices, the US has used up more than 40 per cent of its strategic oil reserve. That hasn’t happened in 30 years, and it will take years to rebuild reserves, according to the Oil and Gas Industry Association. It will not be possible to cope at the expense of domestic production, and imports will be necessary. While purchases are being discussed, the risk of supply disruptions is high.
Battle for the electorate
Sanctions policy and the rejection of Russian oil has sent world prices soaring. “Last spring, the US and Europe stopped purchases, and Moscow had to temporarily cut production. Quotes instantly jumped to $120 a barrel,” recalls Igor Yushkov, a leading expert at the National Energy Security Fund. Petrol in the US immediately set a historical record. On average, a gallon cost $4.6 across the country, and in some states, such as California, it was over six dollars.
“Unlike Russia, in America fuel depends very much on oil prices, and the slightest change is keenly felt. In addition, in the States almost everything is transported by motor transport. The cost of petrol and diesel affects not only motorists, but all goods,” explains Yushkov. As a result, inflation began to unwind. The price of a carton of eggs was up to 12 dollars, a loaf of bread – up to ten. To curb the depreciation of the national currency, the Fed raised the key rate, the cost of servicing loans rose sharply, and a wave of bank failures occurred. Meanwhile, Washington continued to sponsor Ukraine.
The president’s approval rating slipped to 37%. Citizens were extremely concerned, and petrol stations pasted images of the head of state pointing to the price of fuel with the caption “I did it”. Adding fuel to the fire were statements from Republicans. “Miss me already?” – Donald Trump ironised. During his administration, a gallon of petrol cost about two dollars. To somehow contain popular discontent, the Biden administration tried to bring down the tariffs by throwing additional volumes from the country’s reserves onto the market. The American leader signed an executive order obliging the Energy Ministry 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 US mainly uses heavy, high-sulphur oil, but does not produce it itself. They have to export it and stockpile it just in case. The Americans remember how they were deprived of fuel in 1973, when the Arab states cut off the valve to the countries that supported Israel in the conflict. As experts say, then they realised how valuable this resource is – without petrol, 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 per cent of the untouchable reserve in a year. That drew harsh criticism from Republicans. Among other things, they wondered what to do in the event of a natural disaster or war. In addition, it did not solve the problem, and the rapid emptying of reserves will lead to an even greater rise in the price of “black gold” in the future, creating risks of physical disruptions in supply and threatening a new round of inflation, explains fuel market expert Anastasia Bunina.
Now the states are trying to remedy the situation. Deputy Energy Minister David Turk promised to buy oil at every opportunity. “Our goal is to provide taxpayers with a favourable supply,” he said. – For several months now, we have been replenishing reserves as soon as price allows and we will continue to do so.”
In late November, the department reported buying 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 favourable. It was possible to carry it out due to seasonality – in the Northern Hemisphere road transport is more actively used from April to October, analysts say. Now Washington creates increased demand, prices will rise again, and purchases will stop, besides, OPEC+ countries are planning additional production cuts. As a result, the recovery will take a very long time.
There will be no rebuilding
Canada and Mexico are among the main suppliers, followed by the Middle East, and a small part is purchased in Africa, says Igor Yushkov. They used to buy from Venezuela, but in 2019 Washington accused Nicolas Maduro of election fraud and imposed an oil embargo. Then Russia replaced the missing volumes.
Refineries (refineries) in the US specialise in heavy crude. “It is characterised by high density and is intended for the production of aviation paraffin, petrol and asphalt,” Bunina explains.
The Americans have their own oil, but it is unsuitable for domestic use. “It is a very light, low-sulphur substance, so-called shale oil, very close to a gas concentrate. The US produces quite a lot of it, but all of it is exported,” Yushkov clarifies.
It will not be possible to reorganise on domestic resources – it is too difficult and expensive. It is easier to buy raw materials from outside. That is why Washington has softened its rhetoric towards Venezuela since 2022 and lifted some of the restrictions. At the same time, the local press believes that Russian hydrocarbons continue to flow into the country.
In any case, as the election race grows, the mistakes of the Democrats are increasingly being replicated by the Republicans. The oil debacle has already played into their hands – last year the party lost the lower house of parliament. And on the eve of the presidential election in November 2024, the Trumpists are using all available levers to weaken their rival’s position.
Nadezhda Sarapina, RIA