The U.S. government announced on Tuesday (October 7) that it intends to provide up to 40 million barrels of oil from its strategic reserves as loans to energy companies. This action is in line with an agreement with 30 member countries of the International Energy Agency to withdraw from strategic crude oil reserves.
Details of the Withdrawal Agreement
According to this agreement, which was signed in March, members of the International Energy Agency decided to withdraw a total of 400 million barrels of oil from strategic reserves globally. The U.S. share of this agreement is set at 172 million barrels.
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In June, the U.S. proposed to withdraw the remaining 40 million barrels from this agreement. However, by the end of that month, it became clear that companies had only agreed to take about 500,000 barrels from this shipment.
Economic Impacts and Storage Status
U.S. strategic crude oil reserves have fallen to less than 284 million barrels, the lowest level since 1982. Donald Trump, the former President of the United States, withdrew a significant amount of these reserves after the onset of the war against Iran, and Joe Biden also released large quantities of these reserves to the market after the start of military conflicts between Russia and Ukraine in 2022.
Gasoline prices in the United States have reached about $4.45 per gallon, reflecting an increase of about 50% since the beginning of the war against Iran in late February. Similarly, diesel prices have risen by about 70% to $6.50 per gallon.
The U.S. is lending the oil in its strategic reserves to energy companies, which are committed to returning the withdrawn crude oil along with a maximum price increase of 24%. The U.S. Department of Energy has emphasized that this mechanism will help stabilize markets without imposing costs on American taxpayers.
It is worth noting that companies have until October 6 (October 14) to submit their proposals for receiving a new shipment of oil from the strategic reserves. This action could bring the storage levels below the threshold set for withdrawal limitations.
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