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US considers releasing emergency oil reserves to tame fuel price surge

US energy secretary Jennifer Granholm has raised the prospect of releasing crude oil from the government’s strategic petroleum reserve, declaring that “all tools are on the table” as the Biden administration confronts a politically perilous surge in the price of gasoline.

With the average price of petrol at the pump hovering at $3.19 a gallon — the highest in seven years — the White House fears that the rise in fuel costs could damage its political prospects ahead of the midterm elections next year.

“It’s a tool that’s under consideration,” Granholm said of a release of crude supplies from the national strategic petroleum reserve, which analysts say could calm oil markets and bring prices down.

Granholm also did not rule out a ban on crude oil exports. “That’s a tool that we have not used, but it is a tool as well,” she told the FT Energy Transition Strategies Summit on Wednesday.

The strategic petroleum reserve, located near the Gulf of Mexico, is the world’s largest emergency stockpile of crude oil. Managed by the US Department of Energy, the reserve contained 617.8m barrels of oil last week — equal to about a month of US petroleum products demand.

The last big release was in 2011, when the Obama administration worked with other International Energy Agency members to tap emergency stocks to bring down soaring prices. Congress has also authorised periodic sales to raise government revenue.

Exports of US crude oil have been unfettered since Congress lifted federal restrictions in 2015.

The price of US crude stood at about $77.60 a barrel on Wednesday afternoon, hovering at its highest level since 2014. It has risen in tandem with other commodity prices, prompting fears that energy inflation could stall a post-pandemic global economic recovery.

On Monday, the Opec+ group of oil producers ignored pleas from the US government to increase output more quickly than the group had already planned. Instead, it stuck with plans to release an additional 400,000 barrels a day on to the market in November, part of a gradual unwinding of last year’s historic supply cuts.

The Opec+ decision was a blow to the White House, which had asked for faster increases. Jake Sullivan, Biden’s national security adviser, raised the matter during a recent visit to Opec linchpin Saudi Arabia.

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“SPR [releases] came on the table a nanosecond after Jake Sullivan was rebuffed in Riyadh and the administration realised shale producers wouldn’t be able to increase production quickly enough,” said Bob McNally, head of Rapidan Energy Group and a former adviser to the George W Bush White House.

Granholm said the US was disappointed and that “everybody was hoping that there would be additional supply made available so that prices would not be jacked up”.

She also said the US was doing “all it can” to address the tight natural gas supplies that have sent prices skywards in Europe and Asia, including looking into accusations of “manipulation of the market” by Russia.

In the UK, record-high gas prices rattled through bond markets this week, as traders weighed the economic damage to the British economy from the fuel-price spike.

In Asia, a bidding war with European buyers sent prices for cargoes of liquefied natural gas on the spot market to more than $50 per million British thermal units on Wednesday, an all-time high and dramatic reversal from record low prices in May last year.

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