Will Alberta oil plummet as U.S. dumps reserves into market?

With the United States announcing it, along with several other large oil-consuming countries, will be releasing fuel from reserves into the market, Albertans are wondering how it’ll affect the economy here.

U.S. President Joe Biden will release 50 million barrels of crude oil from its strategic reserves. The Americans, along with China, Japan, India, South Korea, and the United Kingdom, are hoping to manipulate the market and reduce the cost of oil and gas.

However, Richard Masson with the University of Calgary’s School of Public Policy says this is unlikely to make a big difference.

“It’s unlikely that prices will drop very much based on this news because the actual amount of oil is pretty small in the scheme of things,” Masson told CityNews.

“So, this is probably not going to result in much lower gas prices or in much lower levels of cash flow for the [oil and gas] industry.”

The move is an unprecedented tactic from the coalition of countries, Masson says.

“It doesn’t happen very often, the petroleum reserve that the U.S. has is over 600 million barrels right now. It’s really designed to be used when there’s a supply disruption,” he said, adding “it’s an unusual step and the market is going to have to figure out how to deal with it.”

Alberta’s Energy Minister agrees, saying the lowering reserve will increase the need for Alberta’s oil and gas.

“The ongoing situation south of the border with President Biden’s decision to release 50 million barrels of oil from the Strategic Petroleum Reserve reinforces the fact that there will continue to be demand for Canadian and Alberta energy for decades to come, and highlights the need for affordable and reliable energy as the world seeks to lower emissions,” said Sonya Savage in a statement.

W/ the Americans and others dumping reserve oil into the market to try to lower prices, Alberta's Energy Minister makes the argument for Keystone XL & the need for #Alberta/Canadian oil & gas. Says it's important important to work together. #cdnpoli #abpoli #ableg Full statement: pic.twitter.com/5JmL0CTa5X

— Saif Kaisar (@StaySaif) November 23, 2021

Masson explains prices will be dependent on what OPEC+ countries, like Russia and Saudi Arabia, decide to do.

“It just depends on how they would like to see overall supply/demand balances, so we’ll see what happens in the next week.”

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OPEC+ reduced oil production during COVID-19. It has since been gradually increasing.

However, demand has picked up and production cannot meet those expectations, so oil and gas prices have increased.

That has helped out with Alberta’s COVID-19 economic recovery.

“So, for Alberta, prices are very strong, they’re kind of high 70s, low 80s, in the last week or so. That’s really good for our economy, companies are making a lot of money, they’re starting to pay a lot of royalties,” Masson added.