With gas prices increasing at their fastest rate since 2000, governments around the globe are cooperating on a plan to pump more fuel onto the market through a series of loans or sales. However, not all countries are on board, and some say the plan doesn't go far enough.
On Tuesday, President Joe Biden announced the White House's plans to release 50 million barrels of oil from strategic petroleum reserves (SPR), by far the largest amount promised by any country. Other countries pledging to tap their reserves include India with a plan to release 5 million barrels, Britain with a plan to allow private reserve holders to release 1.5 million barrels, and Japan which hasn't given specific details.
Japanese officials have said the country will release a few hundred thousand kilolitres of oil, with one hundred thousand kilolitres of oil converting to roughly 630 thousand barrels. Prior reports placed the country's pledge at 4.2 million barrels.
Meanwhile, Chinese officials have stated that the country will release oil from its reserves "according to its own actual needs", without giving any specific commitment or timeline.
The Organization of the Petroleum Exporting Countries and its allies, also known as OPEC+, has been the most significant obstacle in the way of Biden's plans to reduce gas prices by pumping more crude onto the market. OPEC has 15 members including Saudi Arabia, Iraq, IR Iran, and the United Arab Emirates. The ten non-member allies include Russia, Kazakhstan, and Mexico.
The group has repeatedly rebuffed calls from Biden and others to release more oil than is currently planned. The joint effort between the U.S. and cooperating countries to lower fuel prices through SPR releases is being regarded as a warning to OPEC+ to do more to bring the rapidly accelerating prices under control.
Under OPEC+'s current agreement, the group is boosting output by an additional 400,000 barrels per day. According to three sources cited by Reuters, the group has no plans to change this plan. Despite rising prices, OPEC reportedly feels the market will soon see a glut of oil. This is in large part due to suspicions that there will be a resurgence in the pandemic, and thus another drop in demand.
"The market seems to believe in OPEC+ to keep oil balances tight more than it believes in the transitory nature of an SPR release," said Analyst Louise Dickson, a Rystad Senior Oil Markets Analyst.
In the first week of November, OPEC+ will be meeting to discuss current supply and demand dynamics in the market. Some analysts predict that OPEC may halt its increases entirely. While some sources have suggested that Saudi Arabia and Russia are planning to pause increases, others say no such planning has occurred.
Previously, the US has worked in partnership with the International Energy Agency (IEA), an intergovernmental Paris-based agency, to coordinate multi-country oil reserve releases, but the IEA doesn't intervene to influence prices. However, the agency's head did say that some countries are being overly restrictive with their oil reserves.
"Some of the key strains in today's markets may be considered artificial tightness ... because in oil markets today we see close to 6 million barrels per day in spare production capacity lies with the key producers, OPEC+ countries," IEA head Fatih Birol said.
In other words, according to Birol, there's plenty of oil available, the high prices are the result of artificial scarceness caused by oil producers holding millions of barrels in reserve.