Biden oil reserves combine Chinese outreach with US voter appeal Reuters

By Timothy Gardner and Jarrett Renshaw

WASHINGTON, Reuters

The move, announced by the U.S. on Tuesday, underscores the intricate relationship Biden is trying to make with China as it seeks agreement on key issues such as climate change and trade while tied to an economic arms race. The rare moment of cooperation is that inflation, and especially high gasoline prices, are eating away at Biden’s popularity at home.

“This is the new era of oil diplomacy for the U.S. to coordinate with India and China,” said oil historian Daniel Yergin and vice president of IHS Markit. Cooperation with China is likely to be linked to energy and the environment.

“Climate and energy are in a separate category from all the tough issues that need to be addressed between the two countries,” Yergin said.

The diplomatic involvement of the Biden administration with China surfaced this month in Glasgow, Scotland, where the two countries reached a surprise agreement to promote action on climate change, including reducing methane emissions, which is a powerful greenhouse gas.

“Glasgow showed that there is a level of common interest and diplomacy between the United States and China that can be successful,” said Amy Myers, a research professor at Jaffee Tufts University and an expert on global energy markets and climate.

Jaffe said the two countries recognized the importance of a global climate agreement. “I would say‘ Ditto ’in the oil market,” Jaffe said.

Washington has major differences in trade and human rights issues related to Beijing, Xinjiang, Hong Kong, Tibet and Taiwan. But the world’s two largest economies would benefit from energy cooperation given their opposing relations with Saudi Arabia and Russia in terms of low oil prices for consumers.

Together, the United States and China consume nearly 35 million barrels of oil a day, more than a third of global demand. Even though the United States has become one of the world’s largest oil producers, it is still the second largest importer, after China.

US gas prices seven-year high US gas prices seven-year high https://graphics.reuters.com/USA-GASOLINE/PRICES/znvnekmrbpl/chart.png

The world’s leading oil importers https://graphics.reuters.com/GLOBAL-OI/lbpgnbezdvq/chart.png

China currently imports more than 10 million barrels of oil a day, while the United States imports about 6 million barrels a day, although it has greatly reduced its dependence on OPEC producers in recent years, with most imports being from Canada.

Although China did not announce an oil tap on Tuesday, Biden had previously spoken with Chinese President Xi Jinping about opening their reserves and Chinese officials said on November 18 that they were working on the release. China’s first oil company was cut off from its reserves in September, aimed at stabilizing prices.

There are other large importers in the wider group of countries that have chosen to work with the United States and release oil from reserves, including India, Japan and South Korea, ranking third, fourth and fifth, respectively.

U.S. oil prices rose seven years in late October to boost inflation and hit Biden’s approval rating ahead of next year’s midterm elections. With a small majority in both chambers of Congress, Biden’s Democrats cannot afford to lose seats in 2022.

REPEAT TRICKY TREATMENT

Biden could take further steps to maintain coordination with other countries as the COVID-19 pandemic eases, the White House said in a statement Tuesday.

Actually, doing that may not be easy.

“Tensions in the U.S. and China may make cooperation more difficult, but the U.S. is different from other strategic reserve owners because its legislature has mandated it.

selling strategic warehouses ”to fund government programs, ClearView Energy Partners, a non-partisan research group, said in a note to customers.

The U.S. release was just a pre-load of sales promised by Congress in recent years of about 18 million barrels.

There is a risk that consumer and producer countries will continue to make conflicting predictions about global oil supply, an option that will make oil prices even more volatile, or a scenario that Yergin calls “block versus block”.

But in the short term, the actions of consumer countries are likely to put pressure on oil prices, Yergin said.

“This is also happening at a time when the supply / demand balance is improving in the coming months, and this oil deal will add to that. At least for now, what it means is that you will hear far fewer forecasts. About $ 100 worth of oil.”