Oil prices rose above $81 a barrel on Tuesday morning after the Biden administration announced the U.S. and other nations would release tens of millions of barrels of oil from reserves in a ploy to lower prices.
The price of Brent, the global benchmark, rose by more than two percent following the announcement that the U.S. would be releasing 50 million barrels from the Strategic Petroleum Reserves. China, India, South Korea, Japan, and Britain are also planning to release reserves, the White House said.
The Biden administration hopes the reserve release will tamp down the price of gasoline and combat inflation, which has become a major economic and political headache for the administration. The White House and the Federal Reserve earlier this year said that inflation was transitory and would remain confined to just a few areas of the economy, predictions that proved wildly offbase as inflation became widespread, rose to its fastest pace in decades, and appears to be accelerating further.
The U.S. reserves can only be released at a maximum pace of 4.4 million barrels per day, according to the Congressional Research Service, due to pipeline and marine terminal constraints. Total global consumption runs at about 100 million barrels per day. Oil industry experts say the reserve release will likely not put significant downward pressure on prices, doing little to relieve price pressures created by underinvestment in U.S. production in the face of political pressure from climate activists.