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US leads initiative to release strategic oil reserves, along with India, England and others. Check out more details.
The US, along with England, India, South Korea and possibly Japan, started a movement to release strategic oil reserves to contain the price of commodity.
after a negative da OPEC+ to increase the supply of the product on the international market, these countries decided to take action on their own, at a time when the price of a barrel is at its highest price in 3 years.
The decision was taken with the aim of controlling the value of oil, but also to help control internal inflation, which has been a problem in the USA and generating erosion in Biden's approval.
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How do OPEC+ meetings work and why is this an unusual situation?
OPEC+ meetings take place periodically and are intended to help keep the oil market and value in check. In this case, the last meeting defined that there will be no increase in supply, even with orders from the US and other countries, which would cause the value of a barrel to continue growing.
The intervention, made by this other bloc of countries, is an unusual movement and demonstrates a certain dissatisfaction of the consumer countries in relation to the OPEC+ policy, which has been keeping the value of the barrel high, which is negative for the economies in recovery after the health crisis.
Another issue that “stands out” is the inclusion of England in this movement, being one of the first major international economic movements in post-Brexit England.
How will barrels from strategic reserves be released? Could there be diplomatic consequences?
US strategic oil reserves cannot be moved lightly, congressional approval is required for these moves to be made. Initially, a total of 32 million barrels of oil are being loaned to the market, in addition to 18 million barrels to be put up for sale, which have already been approved.
In this sense, some countries did not release amounts in barrels to be released. South Korea and Japan did not open their numbers, while England speaks of 1,5 million barrels. India collaborates with 5 million barrels.
There are two policy issues closely related to this US release, one internal and one external. On the domestic front, we see President Joe Biden having a rocky first year of government. With his party suffering a defeat in the last election and its approval melting, he tries to fight the country's inflation by trying to force down the international value of a barrel of oil.
On the international front, the US goes against the interests of allies within the Gulf, such as the United Arab Emirates, by going against an OPEC decision. It's too soon to say whether this would have any long-term consequences, but that risk is not entirely out of the question.
What is the consequence of this release of barrels of oil to Brazil?
This release of barrels of oil from US strategic reserves could have a positive effect within the domestic market, especially when it comes to fuel prices. With the import parity policy in force at Petrobrás, any fluctuation in the value of Oil has consequences for our economy.
There is no way to predict how and if these releases will really affect the prices of a barrel of oil, or when this modification will reach the fuel pumps, since there is still another OPEC+ meeting this year, on 03/12.
