We are starting to see the makings of energy curtailments in Europe – an exceedingly unpopular step that governments would be unlikely to take if there were any other choice, highlighting the acute desperation that exists over oil and gas supplies.
Another signal of this desperation is Biden’s plan to release a massive 180 million barrels of crude oil into the market from the SPR at a rate of more than a million barrels per day. This is a huge figure that will shrink the SPR to lows not seen since the ‘80s (~388 million barrels) when U.S. oil consumption was substantially lower than it is today. This decades-low emergency inventory would come at a time when U.S. production has stagnated with oil companies resisting calls to invest/pump more, and at a time when demand continues to rise.
The UK said on Friday that it would also release more oil from its reserves.
The drastic actions will be interpreted in the medium term as a cause for concern. OPEC+, on the other hand, appears content to stay the course, agreeing on Thursday to stick the agreed-upon production hikes for May. At the same time, Canada continues to raise the price of carbon, thereby raising the price of gas.
Germany’s economy minister has triggered its early warning system for low levels of gas, and has appealed to companies and private consumers to conserve energy. France’s gas distributor is also expected to issue a decree in the next couple of days detailing a plan for possible gas rationing. The Netherlands’ economic ministry said it, too, would soon ask its citizens to use less gas.
Europe and the United States have expended much time and effort trying to scrape together additional fuel supplies and trying to subsidize energy and gasoline for their people…
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