Biden SPR Release Panned As ‘Spectacular Own Goal’

“Underwhelming.”

That was one adjective bandied about on Wednesday to describe the impact of the Biden administration’s announcement of a coordinated strategic reserve release aimed at bringing down gas prices.

The joint move with China, Japan, India, South Korea and the UK was already priced in, something administration officials attempted to spin as purposeful and desirable.

There is, of course, a political motive, although I’d hardly describe it as “ulterior.” I’ve variously argued that the Biden administration is a placeholder government — a kind of caretaker administration concerned first and foremost with pulling the country back from the edge of autocracy and only second about transformational social change. Indeed, there was always friction between Biden’s commitment to bipartisanship and his sympathy for Progressive agenda items.

That said, Biden does care about everyday people. He is, in a lot of ways, an everyday guy. Scoff as you will, but even if you knew absolutely nothing about the man, all you’d need to do is listen to one press conference and you’d come away thinking something like “Yeah, that guy’s name is probably ‘Joe.’ And I bet he rode the train at some point.”

Jokes aside, the point is just that Biden is clearly keen to shore up his flagging approval ratings and allay inflation concerns, so there’s a sense in which the SPR move was partially self-serving. But Americans can be confident that Biden actually does care what they’re paying at the pump beyond the political calculus. By contrast, it’s entirely possible that Donald Trump doesn’t even know how to operate a gas pump. I’m not being derisive. I mean that literally. Remember, he once suggested that as far as he knew, Americans are required to show ID when buying groceries. Trump’s OPEC jawboning was entirely political.

In either case, though, it comes back to what I said here on Monday. Whenever Americans pay “too much” at the pump, there’s a tendency to assign blame. The implication is that something is amiss and that somebody, somewhere needs to “do something about it.”

While the jury is still out on whether The White House’s somewhat quixotic SPR gambit will have the desired effect on Biden’s approval ratings, the ramifications for crude itself will depend on OPEC, according to RBC’s Helima Croft. “At last week’s ADIPEC conference in Abu Dhabi, key OPEC ministers reiterated their opposition to additional production increases and indicated additional pressure from the Biden administration, including an SPR release, would not alter their production plans,” Croft wrote, in a Tuesday note, before suggesting that the rapidly deteriorating COVID situation in parts of Europe will likely harden the cartel’s resolve.

“We believe that the announcement of a return to lockdowns in Austria and the potential for other European countries to follow suit will be used to justify continued production caution,” Croft went on to say. “Certainly, the sovereign producers have seen their balance sheets bolstered by this year’s significant price surge.”

Yes, “certainly.” And while unlikely, it’s at least possible that the Saudis could attempt to offset the effect of the coordinated reserve releases.

Of course, that’s a geopolitical gamble. Riyadh needs Washington more than Washington needs Riyadh. The green push notwithstanding, the US can produce its own energy. The Saudis, on the other hand, can’t guarantee their own safety.

“While staying the course is our base case… we do not entirely rule out the possibility that Saudi Arabia might actually call for scaling back the OPEC production increase,” RBC went on to say, before reiterating that “several Gulf States with close ties to the US would [likely] oppose such action fearing the political blowback from Washington.”

For their part, PVM called Biden’s move an “own goal,” or at least judging by the price action. “Forget the strong dollar, flare ups in coronavirus infections or concerns about inflation, [Tuesday] it was all about the battle between consumers and producers for supremacy,” Tamas Varga wrote, in a note called “Sell the rumor, buy the fact.” “If it were a football game one might say producers are winning one goal to nil and their opponent has scored a rather spectacular own goal.”

UBS expressed skepticism as well, although their tone was measured. “To some degree, Washington’s strategy has worked — trailing an SPR release around the end of October in an effort to get OPEC+ to release more production has brought down prices [but] these releases even if delivered and fully accounted for do not even meet one day of consumption and are equivalent to ~3 months’ worth of scheduled OPEC+ production increases,” Jon Rigby said, on the way to noting that the releases are “by definition finite [and] may not find buyers in any case.”

Further, Rigby pointed out the obvious. “This policy… appears completely at odds with the COP26 agreement to end fossil fuel subsidies signed less than two weeks ago.”

Own goal indeed.