President Joe Biden’s historic move to release oil from strategic reserves in coordination with big nations including China represents a unique bet that finding common ground with the United States’ biggest economic rival can help dampen fuel prices for middle class Americans.
The move, announced by the U.S. on Tuesday, underscores the complicated relationship Biden is trying to craft with China as he seeks agreement on key issues like climate change and trade, while linked in an economic arms race. The rare moment of cooperation comes as inflation, and especially high gasoline prices, eat at Biden’s popularity at home.
“This is a new era of oil diplomacy for the U.S. to coordinate with India and China” said Daniel Yergin, an oil historian and the vice chairman of IHS Markit. Cooperation with China is likely to stick to energy and environment.
“Climate and energy are in a separate category from all the tough issues that need to be dealt with between the two countries,” Yergin said.
The Biden administration’s diplomatic inroads with China first surfaced in Glasgow, Scotland this month where the two countries hammered out a surprise deal on boosting action on climate change including reducing emissions of methane, a powerful greenhouse gas.
“Glasgow showed that there is some level of common interest and diplomacy that can be successful between the United States and China,” said Amy Myers Jaffee, a research professor at Tufts University and expert on global energy markets and climate.
Jaffee said both countries recognized the importance of a global climate agreement. “I would say ‘Ditto’ on the oil market,” Jaffee said.
Washington has stark differences with Beijing on trade issues and human rights concerns related to Xinjiang, Hong Kong, Tibet and Taiwan. But the world’s top two economies would benefit from energy cooperation given their adversarial relations with Saudi Arabia and Russia in terms of keeping oil prices low for consumers.
Combined, the United States and China consume nearly 35 million barrels of oil a day, more than a third of global demand. Even though the United States has become one of the world’s largest oil producers, it is still the second-largest importer of crude, trailing only China.
U.S. gas prices at seven-year high U.S. gas prices at seven-year high https://graphics.reuters.com/USA-GASOLINE/PRICES/znvnekmrbpl/chart.png
The world’s top oil-importing nations https://graphics.reuters.com/GLOBAL-OI/lbpgnbezdvq/chart.png
China now imports more than 10 million barrels of oil a day, The United States imports about 6 million barrels per day, though in recent years it has sharply reduced its dependency on OPEC producers, with most of its imports now from Canada.
While China did not announce an oil tap on Tuesday, Biden spoke earlier with China’s President Xi Jinping about opening their reserves and Chinese officials said on Nov. 18 they are working on a release. China held the first ever release of oil from its reserve in September, which aimed to stabilize prices.
The broader group of countries that have elected to work with the United States and release oil from their reserves include other large importers, including India, Japan and South Korea, which rank third, fourth and fifth, respectively.
U.S. oil prices hit a seven-year high in late October driving inflation and hitting Biden’s approval rating ahead of midterm elections next year. With razor thin majorities in both chambers of Congress, Biden’s fellow Democrats can ill afford to lose seats in 2022.
REPEAT DEAL TRICKY
Biden could take additional action in coordinating with other countries to maintain supply as the COVID-19 pandemic eases, the White House in a statement Tuesday.
Actually doing so may not be easy.
“Not only could U.S.-China tensions complicate further cooperation, but the U.S. stands apart from other strategic reserve holders in that its legislature has ordered the
selling off of strategic stockpiles” to finance government programs, ClearView Energy Partners, a nonpartisan research group, said in a note to clients.
Some 18 million barrels of the U.S. release was simply a front-loading of required sales that were mandated by Congress in recent years.
There’s a risk that consumer countries and producing countries could keep upping the ante with opposing announcements on global oil supplies, a prospect that would likely make oil prices even more volatile, or what Yergin calls a “bloc versus bloc,” scenario.
But in the short term, the action by consuming countries is likely to put pressure on oil prices, Yergin said.
“This also comes at a time when the supply/demand balance is on a course to improve over the next few months, and this oil deal will add to that. What it means at least for now is you’ll hear a lot fewer predictions about $100 oil.”
(Reporting By Timothy Gardner and Jarrett Renshaw; additional reporting by Jessica Resnick-Ault; Editing by David Gaffen, Heather Timmons and Alistair Bell)
Designer Virgil Abloh remembered at Fashion Awards
Designers and celebrities paid tribute to Virgil Abloh at the Fashion Awards in London on Monday, where the late Louis Vuitton and Off-White creative force was honoured as a leader of change within the industry.
Abloh, the American-born son of Ghanaian immigrants, who became fashion’s highest-profile Black designer, died on Sunday https://www.reuters.com/lifestyle/louis-vuitton-designer-virgil-abloh-dies-2021-11-28 following a two-year battle with a rare form of cancer.
The 41-year-old, who also worked as a DJ and visual artist, had been menswear artistic director at luxury label Louis Vuitton since March 2018.
“Genius, disruptor … (he) will be missed tremendously by all,” veteran designer Tommy Hilfiger said on the red carpet. “He inspired designers as well as the public.”
Designer and television personality Tan France called Abloh “incredible and a visionary … (who) has done the most beautiful work.”
Abloh, who founded label Off-White, was known for mixing streetwear with high-end suits and gowns while at Vuitton. His influences included graffiti art and hip hop.
“Everyone here is going to be talking about Virgil, everyone here has been impacted by his brilliance,” actor Gabrielle Union said.
At the awards, where Abloh’s photo was projected on stage, the designer was among 15 individuals and brands named leaders of change for their actions in the past year helping the environment, people and creativity.
Others on the list included Balenciaga designer Demna Gvasalia, Gucci creative director Alessandro Michele, and Kim Jones, artistic director for Fendi womenswear and couture as well as menswear designer at Dior. Jones was also named designer of the year at the awards.
Michele also won the trailblazer award, while Hilfiger received the outstanding achievement award.
“I’m absolutely grateful, appreciative, humbled by it, but happy to be here and happy to still keep the business rolling,” Hilfiger, 70, said.
Demi Moore, Priyanka Chopra Jonas and Dua Lipa were among the celebrity guests attending the event, a fundraiser for British Fashion Council charities.
(Reporting by Hanna Rantala and Marie-Louise Gumuchian; Editing by Karishma Singh)
Bank of Canada to work with Indigenous groups on reconciliation
The Bank of Canada will work with Indigenous groups to understand the wounds caused by decades of discrimination and determine how reconciliation can create a more inclusive and prosperous economy for all, Governor Tiff Macklem said on Monday.
Macklem, opening a symposium on Indigenous economies, said Canadians could work to correct some of the consequences of those “ugly periods.”
Ottawa forcibly removed thousands of Indigenous children from their communities and put them in residential schools in an effort to strip them of their language and culture, a practice that continues to scar families and individuals.
“The Bank of Canada will be working with a broad spectrum of Indigenous groups to set out what reconciliation means for what we do,” Macklem said.
“Together, we’ll define what reconciliation means for the work of the Bank of Canada — toward a more inclusive and prosperous economy for everyone,” he said.
Canada‘s Truth and Reconciliation Commission called the residential school system “cultural genocide” in 2015, as it set out 94 “calls to action” to try to restore Canada‘s relationship with its Indigenous people, including economic reconciliation.
“We can’t go back and change what’s happened. But we can try to correct some of the consequences,” said Macklem, adding that it is the central bank’s job to create conditions for opportunity for all Canadians.
“Taking concrete steps toward economic reconciliation is our responsibility too. And it’s incumbent upon us to take the time to do this well,” said Macklem.
(Reporting by Julie Gordon in Ottawa; Editing by Dan Grebler)
Canada’s Trans Mountain still ‘days away’ from restarting pipeline
Canada‘s Trans Mountain said on Monday it was “still days away” from restarting the key oil pipeline at a reduced capacity as heavy rains continue to impede restoration efforts.
The pipeline, owned by the Canadian government, ships 300,000 barrels a day of crude and refined products from Alberta to the Pacific Coast. It was temporarily shut down as heavy rains and flooding caused widespread disruption in parts of British Columbia.
The operator said assessments of the impacts from the latest storm are being undertaken with a focus on the Coldwater and Coquihalla regions.
Work was interrupted at some sites on Sunday due to high water accumulation or lack of access, the company added.
The company on Friday had said it was working toward restarting the oil pipeline at a reduced capacity this week.
(Reporting by Rithika Krishna in Bengaluru; Editing by Amy Caren Daniel and Krishna Chandra Eluri)
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