By Timothy Gardner and Jarrett Renshaw
WASHINGTON, November 23 (Reuters) – President Joe Biden’s historic decision to release oil from strategic reserves in coordination with major nations, including China, represents a unique gamble on finding common ground with the United States. United States’ biggest economic rival can help cushion fuel prices for middle-class Americans.
The move, announced by the United States on Tuesday, underlines the complicated relationship Biden is trying to forge with China as he seeks agreement on key issues such as climate change and trade, while being linked to a race to economic armaments. The rare moment of cooperation comes as inflation, and particularly high gas prices, eat away at Biden’s popularity at home.
“This is a new era in oil diplomacy for the United States to coordinate with India and China,” said Daniel Yergin, oil historian and vice president of IHS Markit. Cooperation with China should stick to energy and the environment.
“Climate and energy are in a separate category of all the difficult issues that need to be addressed between the two countries,” Yergin said.
The Biden administration’s diplomatic forays with China first surfaced in Glasgow, Scotland this month, where the two countries reached a surprise deal on stepping up action on climate change , in particular reducing emissions of methane, a powerful greenhouse gas.
“Glasgow has shown that there is a certain level of common interest and diplomacy that can be successful between the United States and China,” said Amy Myers Jaffee, research professor at Tufts University and expert on global markets. energy and climate.
Jaffee said the two countries recognize the importance of a global climate agreement. “I would say ‘ditto’ in the oil market,” Jaffee said.
Washington has deep differences with Beijing over trade and human rights issues related to Xinjiang, Hong Kong, Tibet and Taiwan. Corn the two best in the world economies would benefit from energy cooperation given their conflicted relations with Saudi Arabia and Russia in terms of keeping oil prices low for consumers.
Together, the United States and China consume nearly 35 million barrels of oil per day, more than a third of global demand. Even though the United States has become one of the largest oil producers in the world, it remains the second largest importer of crude, behind China.
China now imports more than 10 million barrels of oil per day. The United States imports about 6 million barrels per day, although in recent years it has greatly reduced its dependence on OPEC producers, with most of its imports now coming from Canada.
While China did not announce an oil tap on Tuesday, Biden spoke with Chinese President Xi Jinping earlier about opening their reserves and Chinese officials said on Nov. 18 they were working on a release. . China released oil from its reserves for the first time in September, in an effort to stabilize prices.
The larger group of countries that have chosen to work with the United States and release oil from their reserves includes other major importers, including India, Japan and South Korea, which rank third, respectively, fourth and fifth.
U.S. oil prices hit a seven-year high in late October, driving inflation and hitting Biden’s approval rating ahead of next year’s midterm elections. With very slim majorities in both houses of Congress, Biden’s fellow Democrats cannot afford to lose seats in 2022.
Biden could take additional action by coordinating with other countries to maintain supply as the COVID-19 pandemic abates, the White House said in a statement on Tuesday.
In fact, doing it may not be easy.
“Not only could tensions between the United States and China complicate cooperation, but the United States stands out from other holders of strategic reserves in that its legislature has ordered the
sell strategic stocks “to fund government programs,” ClearView Energy Partners, a non-partisan research group, said in a note to clients.
Some 18 million barrels of US liberation were just a first load of the required sales that have been mandated by Congress in recent years.
There is a risk that consuming and producing countries will continue to raise the stakes with opposing announcements on global oil supplies, a prospect that would likely make oil prices even more volatile, or what Yergin calls a scenario. ” block against block “.
But in the short term, actions by consuming countries are likely to put pressure on oil prices, Yergin said.
“It also comes at a time when the supply / demand balance is set to improve over the next few months, and this oil deal will add to that. predictions about $ 100 worth of oil. “
US gas price at seven-year high US gas price at seven-year high https://tmsnrt.rs/3qUsjE7
The main oil importing countries in the world https://tmsnrt.rs/3oRxkLb
(Reporting by Timothy Gardner and Jarrett Renshaw; additional reporting by Jessica Resnick-Ault; Editing by David Gaffen, Heather Timmons and Alistair Bell)
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