Crude oil prices continue to see violent price moves. Today, benchmark prices have slumped once again on news the White House will coordinate its largest-ever Strategic Petroleum Reserve release.
President Joe Biden and his administration are looking to battle inflationary pressures, which have taken key measures of inflation to their highest level in four decades. For consumers, one ramification of this is higher prices at the gas pump.
Accordingly, a massive release from the Strategic Petroleum reserve is what Biden hopes will stop the bleeding.
Oil prices have been on the rise for some time, tied to the Russian invasion of Ukraine. Indeed, expectations that the global energy supply could be disrupted from this conflict have sent prices soaring. It’s not just oil — many other commodities of which Russia is a major producer are surging in price as well.
With this record-setting Strategic Petroleum Reserve release in focus today, let’s dive a little bit more into what it could mean for Wall Street.
What Does a Strategic Petroleum Reserve Release Mean for Stocks?
Biden has announced that approximately 180 million barrels of oil could be put on the market over the next six months. Essentially, the administration is looking to release 1 million barrels of oil per day over this period. Doing so may tackle some short-term concerns around supply shortages, particularly domestically. This move may also allow U.S. producers to export more of their oil, easing the global supply/demand imbalance.
That said, various analysts have weighed in on this topic. On Thursday, Goldman Sachs released a research note that highlighted the fact that while this move may help the energy market rebalance in the near-term, the longer-term structural issues are likely to remain in place. Accordingly, this may simply be a short-term reprieve for consumers, many of whom are still sticker-shocked.
For investors, this move has a number of implications. Fuel remains a key input cost for most companies. Indeed, whether it’s the transportation of goods, or direct input costs like with airlines, companies have been forced to raise prices due to the current energy environment. An easing of energy prices is broadly bullish for most stocks.
Energy stocks appear to be brushing off today’s news, while the broader stock market indices march lower this afternoon. However, investors and consumers may have something to cheer with this announcement over the medium term.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
