A dip in crude oil prices amid concerns over possible demand impacts from the omicron variant of the coronavirus could cause the US to adjust the timing of a release from its Strategic Petroleum Reserve if pain at the pump for US consumers also begins to ease, US Deputy Energy Secretary David Turk said Dec. 1.
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Turk's remarks came as a group of Senate Republicans floated legislation that would handcuff the Biden administration's ability to tap the SPR without first taking steps to bolster domestic oil and gas production.
The White House announced Nov. 23 that the US would release 50 million barrels from the SPR by early next year alongside releases from other major oil-consuming countries, as part of the Biden administration's efforts to address high domestic gasoline prices and record inflation.
Speaking at the Reuters NEXT virtual global conference, Turk said China and other countries may also look to time their release of crude oil reserves based on oil prices.
"The metric of our success is not whether we get 50 million barrels out as quickly as we possibly can," Turk said. Rather, it will come down to whether fuel prices come down and are affordable for consumers, he said, adding that "we hope other countries are thinking about this not as one particular moment in time but over a period of time to deal with a volatile market."
As previously announced, the US SPR release includes an exchange of up to 32 million barrels that would be delivered in mid-December through April and returned in 2022-2024, in addition to 18 million barrels sold in the coming months that were already required by Congress to be sold by the end of 2022.
Crude oil futures have been near three-month lows on news that the omicron variant posed a high global risk. Front-month NYMEX January WTI settled 61 cents lower at $65.57/b and ICE February Brent fell 36 cents to $68.87/b.
Turk said President Joe Biden granted the Department of Energy, which manages the SPR, "flexibility in how to do the release over this next several months period of time, understanding that we're in a volatile market" and have been since the pandemic hit.
"So if the price of oil goes down significantly, if the pain at the pump that's currently being experienced by consumers around our country and around the world dissipates, for whatever reason, then we'd use the tools differently than we would use if the price remains high or even goes up further," Turk said. "We purposefully put in place flexible tools that allow us to adapt," depending on where the price of oil and domestic gasoline go over the next few months.
The White House also previously announced that China, India, Japan, South Korea and the UK would join the US in releasing strategic oil stocks.
India has announced it would release 5 million barrels, and the UK said it would allow companies in the country to voluntarily release up to a combined 1.5 million barrels of private stocks. But state-backed media in China reportedly published an editorial suggesting that the Chinese government would be doing the US a favor and it thus had the upper hand in deciding its next move.
To that, Turk asserted that the coordinated, multi-country effort was the result of "robust diplomacy."
"It's not a country doing another country a favor," he continued. "It's shared interests, and it's good diplomacy to understand where those shared interests lie." He added that affordable, stable fuel prices were in the best interest of China and the rest of the participating countries.
Turk further contended that China "has already, not only privately but publicly, expressed interest in tapping into their reserves in order to moderate the price and to make sure that we have some stability in the markets going forward."
Turk said all of those involved were watching the markets very closely, continuing to engage in active conversations with key countries, and paying attention to the OPEC+ producer bloc as it meets this week.
"I think each country will make decisions based on what's useful and good for their consumers and based on where the price is," he said.
Separately, Senate Republicans introduced legislation Dec. 1 that would limit the energy secretary's ability to tap the SPR to situations involving a severe energy supply interruption until the secretary of the Interior issues a plan for increasing oil and gas production on federal lands and waters.
GOP members of Congress have argued that Biden's policy agenda -- which has seen the US cancel the Keystone XL pipeline, pause oil and gas drilling leases on federal lands and waters and propose higher taxes on oil and gas developers -- is behind the rise in gasoline prices and is putting US energy and national security at risk.
"The Strategic Production Response Act provides a real solution to the Biden administration's reckless policies," Senate Committee on Energy and Natural Resources ranking Republican John Barrasso of Wyoming, said of the legislation, which he and 10 other Republicans on the committee said will prioritize American energy production.