US’s proposal to sell off Nation’s Emergency Oil Stock Pile

Washington : US President Donald Trump has given indications that the emergency oil stockpile, kept for a propective disaster should be put up for sale. This proposal has been worked out to reduce the burden of indebtedness on the US economy. As per a statement from the White House on Monday, reserves till 2018 could be sold to generate $500 million funds. On account of these plans of Trump, oil markets are in a state of confusion and the prices of oil in the international market are expected to slide down.

In US 68.77 million barrel crude oil has been kept in reserve under the ‘Strategic Oil Reserve’. About 50% from this reserve has been ordered to be put up for sale. In a document released by the White House regarding this, the words, reduce the reserves by half, have been used. The sale is expected to start from the next financial year and the funds that would be raised from the sale in the next decade would be $ 16 billion.

The concept of ‘Strategic Oil Reserve’ developed in US in 1975 in the context of Arab countries refusing the supply of crude oil to the US. It has been noticed that US has been moving towards self-sufficiency in oil in the past few years on the strength of ‘shale oil’. With this background, many financial experts and analysts had expressed views that US does not now need reserves. Hence, with this view the decision to sale 50% reserves seems significant.

Philip Vahlenger, a financial analyst had said that dependency for crude on other nations is a thing of the past for US and hence there should be no need for reserves. While other experts have expressed anger that the ‘Strategic Oil Reserve’ has been used as a political weapon.

With the production of shale oil in US, and with a slide downwards in the oil market, this decision of selling 50% reserve oil is not only shocking, but may cause severe repercussion in the International oil market.