A unanimous decision made by the Organization of Petroleum Exporting Countries (OPEC) continues to limit oil production.
Saudi Aramco, one of the largest and profitable oil companies in the world, has announced that they will not be influenced by U.S. calls for an increase in oil supply and continue to act towards their goal of increasing output by 400,000 barrels per day each month.
Slowly increasing output each month was decided earlier this year to regulate the output and keep prices from rapidly falling.
As the world begins to reopen and reach a state of normalcy and start their long commutes, oil is heavily relied on once again. With barrels priced at $80 and global demand over 100 million barrels a day, gas prices are increasing all over the country.
Asian countries, such as India and China that are customers of Saudi Aramco, are forced to pay higher prices for oil as the prices have increased to $2.70 a barrel compared to the $1.30 paid in November.
President Joe Biden’s call to increase oil supply was completely ignored by the oil kingdom, who will most likely continue to constrict oil supply for the remainder of 2021. However, as inflation and natural gas shortages continue to impact Americans, all eyes are on Biden.
Following the announcement of Aramco, President Biden has hinted at a possible resolution of tapping into the Strategic Petroleum Reserves, the world’s largest emergency fuel reserves in the U.S., to combat the high gas prices if Saudi Arabia does not reverse their decision.
With the holidays right around the corner and the pressure on Biden intensifying, Biden has to act quickly. Using the oil saved in the reserves, a release of more oil into the market may undermine the efforts of OPEC and decrease the prices for consumers.
According to Bloomberg, President Biden has already met with Chinese President Xi Jinping to release oil from reserves. With China being one of Saudi Arabia’s customers, releasing oil by both countries may cause other countries to follow.
Suppose the U.S. releases more oil, and other countries follow by tapping into their own reserves. In that case, the Kingdom may retaliate and continue to restrict oil supply as reserves do not last forever. Therefore, oil prices will continue to feel the impact and may not decrease soon.
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