December 1, 2021, 1:56

    Joe Biden constructs a club of oil guzzlers

    Joe Biden constructs a club of oil guzzlers

    NEW YORK, Nov 23 (Reuters Breakingviews) – U.S. President Joe Biden is tapping America’s oil stockpile, along with China, India, South Korea, Japan and the United Kingdom in a coordinated effort to ease energy prices. Releasing under 100 million barrels of oil probably will have a small and transitory affect. But a user cartel of sorts is a direct response to the one that exists for suppliers, and could have some important impact in the long run.

    The total amount of oil that will be released from all of the countries could exceed 70 million barrels, according to research outfit Rystad Energy. BP (BP.L) said earlier this month that global oil demand is above 100 million barrels per day, so the effort cobbles together less than a day’s worth of oil. And the Organization of the Petroleum Exporting Countries and its allies have about 7 million read more barrels of spare capacity daily. Should oil-producing nations decide, they could counteract the released supply in less than two weeks.

    Still the nations that unveiled the effort on Tuesday represent about 50% of world oil demand, according to the U.S. Energy Information Administration. They cannot just stop using oil, or force their constituents to curtail it. So controlling demand over the short run is hard. But controlling supply has proven difficult, too. Though OPEC sets limits, countries that are members often pump more oil than their allotted amount.

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    And over the longer term, economies are more flexible. Governments can encourage the growth of alternatives such as electric cars. Moreover, OPEC predicts China and India to drive about 40% of increased global energy demand this decade, and American’s love of gas guzzlers isn’t going anywhere for now. Ford Motor, Dodge, and Chevrolet pick-up trucks are still by far the most popular vehicles in the United States, according to Car and Driver.

    Still few businesses can stand losing their biggest clients over the long run, and that goes for OPEC, too. China, India and the United States individually might have some power to change the global energy dynamic, but a cartel that works together to reduce demand through researching and subsidizing the development and deployment of alternative technologies, which would presumably spread worldwide, could be powerful indeed.

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