The Effects of the Release of U.S. Oil on the Market

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Table of Contents

Introduction
Discussion
Conclusion
Reference

Introduction

It is important to note that Panel B depicts the effects of the release of U.S. oil on the market. The main reason is the fact that the United States operates in a competitive market, where it is a price-taker.

Discussion

In other words, it cannot individually influence the price through the quantity it supplies through its Strategic Petroleum Reserves or SPRs. It is stated that “on Thursday, it said it will announce the release of 1 million barrels a day (roughly 1% of global demand) from the Strategic Petroleum Reserve over the next six months” (Lee, 2022, para. 2). Thus, the quantity released is negligible and insignificant since the price was not affected substantially. It is reported that “past experience has shown that such price impacts are short-lived. That was the case following two recent SPR releases” (Lee, 2022, para. 6). The change or shift takes place in regards to the supply curve since the demand is static. The movement along the curve is the demand curve facing a price-taker is horizontal to the right.

Moreover, it should be noted that the release of oil from the strategic reserves shifts the supply to the right, but since it is small compared to the total market output, the price remains mostly static. The United States is a price-taking agent facing a relatively constant demand, where the supply is being by OPEC, particularly Russia. The release of oil from SPRs does not have the necessary effect of making the supply reductions by OPEC negligible.

Conclusion

Therefore, Panel B holds the highest degree of relevance to the topic of the article because it shows how price remains unaltered despite the movement along the demand curve across the quantity levels.

Reference

Lee, J. (2022). U.S. oil release could have been more strategic.Wall Street Journal. Web.

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The Effects of the Release of U.S. Oil on the Market

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