Petrol prices: Howard Cox calls for cuts to fuel duty
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The move is being led by the US which has announced it will release around 50 million barrels of crude oil from its reserves. A UK Government spokesperson said: “If all companies chose to use this flexibility it would release the equivalent of 1.5 million barrels of oil. This does not impact UK oil reserves which are significantly above the 90 days required by the IEA (International Energy Agency).” India has also followed suit announcing a release of five million barrels.
The move comes as President Biden faces growing pressure in the US over the cost of petrol and the impact on American consumers.
The Organisation of Petroleum Exporting Countries (OPEC) has so far resisted calls from the Biden administration to release more oil onto the market.
In a statement the White House said: “American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand as the global economy emerges from the pandemic.
“That’s why President Biden is using every tool available to him to work to lower prices and address the lack of supply.”
China, India, South Korea and Japan have also got involved in the plans making this the first coordinated effort of its kind.
Senate Majority Leader Charles Schumer welcomed the news as “providing much-needed temporary relief at the pump” as well as sending a message that OPEC cannot “recklessly” manipulate supply to artificially inflate gas prices”.
President Biden’s former rival Donald Trump was more critical though describing the move as an “attack” on the US’s Strategic Oil Reserves.
The former president added: “Those reserves are meant to be used for serious emergencies, like war, and nothing else”.
The reserves are an emergency stockpile typically used in the event of natural disasters or other major crises however they have previously also be used to help correct prices.
The US currently holds around 605 million barrels in reserve.
Jamie Maddock, equity research analyst at Quilter Cheviot suggested the move would only provide “temporary relief” pointing out the US release amounts to around half a day’s global oil demand.
Analysts are now concerned OPEC may simply restrict release of oil to make up for the releases.
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Mr Maddock said: “It seems more symbolic than anything, as it shows clear intent to drive down inflation and limit the associated risks for the global economy.
“With the Fed holding firm on rate rises, from a policy perspective it is clearly important for the government to be attempting to dampen the upside risks to inflation.
“While OPEC+ had previously outlined a strategy to incrementally return oil to the market, it may now opt to adjust its original steadfast approach and delay the next increase.”
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