crude oil
America has played a big gamble to control the increasing instability in the global oil market. The Trump administration announced on Monday that it will lend 53.3 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) to energy companies. The purpose of this step is to control the rising oil prices due to the Iran-Israel war and the Strait of Hormuz crisis.
According to the Department of Energy (DOE), nine companies including ExxonMobil, Trafigura and Marathon Petroleum Company have applied to borrow oil from SPR. However, only 58% of the 92.5 million barrels of oil made available by the department last month was taken. Even before this, America has released about 80 million barrels of oil this spring.
This decision is part of a global agreement with the member countries of the International Energy Agency (IEA). In March, more than 30 countries agreed that oil would be released from strategic reserves if needed, so that the market could be kept stable in case of global supply disruption. IEA chief Fatih Birol recently said that the current war could become the biggest energy crisis the world has ever faced. He warned that the agency was prepared to release more strategic reserves if supply disruptions continued. IEA member countries have so far released about 20% of their available reserves.
Companies will have to return this oil
According to DOE, this oil being given to the companies will later have to be returned in the form of crude oil. Apart from this, companies will also have to pay a premium of up to 24%. The government says that this will bring stability in the market and there will be no additional burden on the taxpayers. At present there are about 384 million barrels of oil in SPR, which is considered equal to only four days of world consumption. In such a situation, if the global energy crisis deepens, the challenge for America to maintain reserves may also increase.
