The recent surge in oil prices has led some in the U.S. to call for a release oil from the government’s strategic reserve, but a top U.S. official said Tuesday that wouldn’t do much good.
U.S. oil prices have surged 24% in the past six months, hitting a seven-year closing high of $84.65 on Oct. 26. U.S. crude recently traded at $80.84, barely changed from Monday.
Strong demand as the pandemic wanes, combined with OPEC-Plus’ decisions to limit production, has boosted prices.
But opening the strategic reserve’s spigots would have a limited effect on oil prices, said Stephen Nalley, acting administrator of the U.S. Energy Information Administration.
“Our analysis shows that it’s generally short-lived -- a couple of months -- and that typically the other dynamics in the market would overtake any decrease in price,” he said in Senate testimony Tuesday, Bloomberg reports.
The reserve held 606 million barrels as of Nov. 12, according to the energy department.
Letting out 15 million to 48 million barrels over a short period would depress crude oil prices by about $2 a barrel, or the equivalent of up to 10 cents per gallon of gasoline, Nalley said.
Oil stocks Exxon Mobil (XOM Get Exxon Mobil Corporation Report and Chevron (CVX Get Chevron Corporation Report rose Tuesday, with Exxon closing 1% higher at $65.02, and Chevron firming 0.39% to $117.28. Chevron’s increase exactly matched that of the S&P 500 index.
Morningstar analyst Allen Good assigns Exxon a narrow moat and $75 as fair value, and assigns Chevron a narrow moat and $128 as fair value.