Release of US oil reserves addresses ‘underlying crisis’ and not higher prices, envoy says

The US released crude oil from its Strategic Petroleum Reserve to address the “underlying crisis” and not the international energy price fluctuations, an adviser to President Joe Biden has said.

Amos Hochstein, US Special Presidential Co-ordinator for Global Infrastructure and Energy Security, was speaking at the Atlantic Council Global Energy Forum in Abu Dhabi on Saturday. “We didn't use [the] petroleum reserve because of price fluctuations. We used the SPR as a result of a crisis that’s causing the price difference and there’s a big difference,” said Mr Hochstein. He said the SPR was last used when nearly two million barrels came off the market overnight during the Libya war.

Arecord 180 million barrels of oil were released from America’s emergency reserve over the past year after Russia’s invasion of Ukraine resulted in Brent crude surging close to a 14-year high of $140 per barrel.

Last month, the US Department of Energy said it would replenish the reserves, starting with a purchase of three million barrels of crude.

“We worked together with the Congress and cancelled the mandated [SPR] releases from 2024 to 2027. That’s a significant amount of oil that the market was expecting that would be released,” said Mr Hochstein.

“We will at the same time continue to use that [SPR] in case of a crisis emergence or one that will affect consumers in the US and around the world."

The US Congress had mandated in previous laws a sale of about 147 million barrels of oil from the fiscal year 2024 to 2027.

Oil prices rose nearly 9 per cent last week amid hopes of fuel demand recovery in China, the world’s second-largest economy and top crude importer.

“We have to be prepared for higher prices and what our responses are,” said Mr Hochstein "We have to be prepared for the reverse if prices decline to a lower level and how [we can] be opportunistic in the market. “This is going to be a really fluid dynamic.”

A windfall profits tax on US oil companies, which have largely benefited from higher energy prices, is “not on the table” at the moment, the US energy envoy said. Politicians in the UK and Europe have approved windfall taxes after global oil majors reported record profits last year.

Last year, the US passed the Inflation Reduction Act (IRA), which offers a series of tax incentives on wind, solar, hydropower and other renewables as well as a push towards electric vehicle ownership. “The IRA is driving investment from around the world and inside the US,” said Mr Hochstein.

The energy official urged other countries to “follow suit” and provide incentives to their clean energy sector.

“We need to incentivise investment because on its own, it’s not going to happen. The markets will not address it and investments into transforming the global energy systems are not going to happen,” he said. “We have to create government spending and signal to the market that we are willing to make the small dollar investment that will leverage the larger dollar investments.”

He underlined the importance of clean energy investments in developing and middle income countries for “equitable energy transition”.

Financial institutions, the private sector and governments around the world are investing “billions and trillions of dollars of commitments and pledges to invest in the energy transition”, Mr Hochstein said.

However, most of that money is being invested in the Organisation for Economic Co-operation and Development (OECD) group and in developed countries. “If you want to fight climate change, it can't be done in one group of countries and not in another,” he added.

Last year, the UAE and US signed a strategic partnership to invest $100 billion to produce 100 gigawatts of clean energy globally by 2035.

As part of the partnership, the two countries will set up an expert group to identify priority projects. They will also seek to “bridge the gap between developed and developing countries in the investment in and deployment of clean energy to ensure global efforts to reduce emissions do not falter”, the White House said.

The UAE and US will also work together to prioritise commercial projects in developing and poor countries, as well as to support them with technical and financial assistance.