On Tuesday, US President Joe Biden announced the planned release of 50 million barrels of crude from the US Strategic Petroleum Reserve (SPR) in a coordinated effort with China, Japan, South Korea, and India to curb soaring energy prices. This was the first time in two decades that a US President used the release to tame energy prices. Tapping SPR crude is typically made to tackle supply disruptions caused by hurricanes, infrastructure damages, or a war.
However, analysts said the released volume was too small and would likely have a short-lived impact on prices. Instead, they warned that the move could affect the investment landscape in the upstream sector. The drilling industry may see the release as a signal that an oil price of $80 per barrel is the upper limit importers are willing to accept. This could cap potential profits from oil investment in the future. It poses new risks that will force energy players to re-think their investments in new projects, from drilling to oil field services and pipelines.
