Biden’s oil reserves bet to combine China’s outreach with attractiveness to U.S. voters Reuters

© Reuters. File picture: On November 15, 2021, US President Joe Biden had a virtual conversation with Chinese leader Xi Jinping at the White House in Washington, USA.Reuters/Jonathan Ernst

Authors: Timothy Gardner and Jarrett Renshaw

Washington (Reuters)-President Joe Biden’s historic move to coordinate the release of oil from strategic reserves with major powers including China represents a unique bet that finding common ground with America’s largest economic rival can help curb Fuel prices for the middle class in the United States.

The move announced by the United States on Tuesday highlights the complex relationship Biden is trying to establish with China as he seeks to reach agreements on key issues such as climate change and trade, while at the same time being linked to the economic arms race. The rare moment of cooperation coincides with inflation, especially when high gasoline prices are eroding Biden’s domestic popularity.

“This is a new era of oil diplomacy coordinated by the United States with India and China,” said Daniel Yergin, an oil historian and vice chairman of IHS Markit. Cooperation with China may stay in the energy and environmental fields.

“Climate and energy and all the thorny issues that need to be dealt with between the two countries belong to a separate category,” Yekin said.

Diplomatic progress between the Biden administration and China surfaced for the first time this month in Glasgow, Scotland, where the two countries finalized an unexpected agreement to promote action against climate change, including reducing methane, a powerful greenhouse gas. emission.

Amy Miles Jaffe, a research professor at Tufts University and an expert on global energy markets and climate, said: “Glasgow shows that there is a certain degree of mutual interest and diplomacy between the United States and China that can be successful.”

Jaffe said that both countries recognize the importance of a global climate agreement. “I would say’same as above’ in the oil market,” Jaffe said.

There are obvious differences between Washington and Beijing on trade issues and human rights issues related to Xinjiang, Hong Kong, Tibet, and Taiwan. But given the hostile relationship with Saudi Arabia and Russia in keeping oil prices low for consumers, the world’s two largest economies will benefit from energy cooperation.

The United States and China consume nearly 35 million barrels of oil a day, accounting for more than one-third of global demand. Although the United States has become one of the largest oil producers in the world, it is still the second largest crude oil importer after China.

U.S. natural gas prices hit a seven-year high

The world’s largest oil importer

China now imports more than 10 million barrels of oil a day, and the United States imports about 6 million barrels of oil a day. Although it has greatly reduced its dependence on OPEC producing countries in recent years, most of its imports now come from Canada.

Although China did not announce oil exploration on Tuesday, Biden had earlier talked with Chinese President Xi Jinping about opening up oil reserves, and Chinese officials said on November 18 that they were working to release oil. China held in September to release oil from its reserves for the first time in history, in an effort to stabilize prices.

The broader countries that choose to cooperate with the United States and release oil from its reserves include other large importers, including India, Japan, and South Korea, ranking third, fourth, and fifth, respectively.

U.S. oil prices hit a seven-year high at the end of October, boosting inflation and hitting Biden’s approval rate before next year’s midterm elections. Because the majority of seats in both houses of Congress is weak, Biden’s fellow Democrats cannot bear the consequences of losing their seats in 2022.

Repeated transactions are tricky

The White House said in a statement on Tuesday that as the COVID-19 pandemic eases, Biden may take additional actions to coordinate with other countries to maintain supplies.

In fact, this may not be easy.

“Not only will tensions between the U.S. and China complicate further cooperation, but the difference between the U.S. and other strategic reserve holders is that its legislature has ordered

ClearView Energy Partners, a nonpartisan research organization, stated in a report to clients that it “sells strategic inventory” to fund government programs.

The approximately 18 million barrels of crude oil released by the United States is only the pre-sale volume mandated by Congress in recent years.

Consumer and producer countries may continue to increase their bets and oppose the announcement of global oil supply. This prospect may make oil prices more volatile, or what Yekin calls a “group-to-group” scenario.

But in the short term, the actions of consumer countries may put pressure on oil prices, Yergin said.

“This is also happening when the balance of supply and demand improves in the next few months, and this oil transaction will increase this. At least for now, this means you will hear fewer forecasts of about $100 in oil. .”

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