Page 5 - NorthAmOil Week 13 2022

NorthAmOil COMMENTARY NorthAmOil

There is little spare
capacity for moving
large volumes of
SPR crude without
disrupting existing oil
flows in the Gulf Coast
region.

releases, Biden continues to ramp up the vol- – this threatens to potentially eclipse any impact
umes being released, in the absence of OPEC+ the SPR release could have.
action to rein in price increases. Indeed, some analysts have even cautioned
“This is a moment of consequence and peril that the release could leave the US more vulner-
for the world and pain at the pump for Ameri- able, given that the SPR is the largest emergency
can families,” Biden stated. “The bottom line is, stockpile in the world, with a capacity of 714mn
if we want lower [gasoline] prices, we need to barrels, and is set to be rapidly depleted during
have more oil supply right now.” this highly uncertain time. The IEA estimated
Indeed, he also urged US oil and gas compa- last month that up to 3mn bpd of Russian crude
nies to ramp up production instead of contin- could be disrupted as a result of sanctions and
uing to prioritise returns to shareholders while general reluctance on the part of buyers to pur-
keeping output increases constrained, as they chase oil from Russia at this time. If Russian
have been doing recently. losses end up being larger than the market
In a press briefing, the White House noted expects, this will pose significant challenges.
that on federal land alone – which accounts There will also be logistical challenges to con-
for a minority of US oil production – operators tent with. In a blog post on March 31 respond- Biden has
were sitting on more than 9,000 approved but ing to news of the SPR release, consultancy RBN
unused permits. Biden even went as far as pro- Energy noted that the reserve’s ability to quickly authorised two
posing that Congress introduce fees for sitting and efficiently distribute large volumes of crude previous releases
on unused federal land. had been compromised in recent years owing
However, even if producers heed Biden’s call to evolving patterns of demand and supply con- from the SPR
– which is still unclear so far, not least because necting US producers and refiners, among other
they also remain under pressure from inves- factors. Increased utilisation of pipelines in the since November
tors to return capital to them – it will take a lit- Gulf Coast region also leaves little capacity to
tle time to bring more production online. The spare for moving large volumes of SPR crude 2021 in an effort
Biden administration estimates that around an without disrupting the existing flow of domes- to curb oil price
additional 1mn bpd can be added in the US this tic production and Canadian imports, RBN
year, but only a few months down the line. This warned. increases.
is in part why it is pressing ahead with the SPR These challenges mean that the success of the
release in the meantime. release, both in terms of logistics and in terms
of its intended impact, still hangs in the balance.
What next? The IEA appears set to follow Biden’s lead in
Biden’s announcement led to US oil prices fall- agreeing to more releases from SPRs among its
ing by around 7%, but ultimately they still closed members once again, and this could help apply
at above $100 per barrel on March 31. With the further downward pressure on crude prices. But
risk of supply disruptions remaining high – espe- it is far from guaranteed that it will be enough in
cially in terms of Russian crude reaching Europe these unprecedented times.™

Week 13 31•March•2022 www. NEWSBASE .com P5