Wealthy Nations Pledge Record Release Of Emergency Oil Reserves In A Bid To Calm Surging Prices

PARIS (AP) — A group representing many of the world’s richest countries agreed Wednesday to release the largest amount of emergency oil reserves in history to counter the effects of the global crisis. Iran war Energy markets and suspension of cargo transportation through the Strait of Hormuz.

The International Energy Agency said: It will enable 400 million barrels of oil to be put into use from its members’ emergency reserves, more than double the 182.7 million barrels the IEA’s 32 member countries have released in 2022 in response to Russia’s full-scale invasion of Ukraine.

“This is a major action aimed at mitigating the immediate effects of market disruption,” said Fatih Birol, director general of the Paris-based IEA. “But to be clear, the most important thing for a return to stable oil and gas flows is the resumption of transit through the Strait of Hormuz.”

There is Iran attacked commercial ships It is escalating its campaign to clamp down on the oil-rich region along the Persian Gulf in response to U.S. and Israeli attacks. Global energy concerns are increasing and effectively halting cargo traffic in the narrow Strait of Hormuz, through which about a fifth of all oil is sent from the Persian Gulf to the Indian Ocean. There is also Iran targeted oil fields and refineries Aiming for adequate production in Gulf Arab countries global economic pain Pressuring the US and Israel to stop their attacks.

Export volumes of crude and refined products are currently below 10% of pre-war levels, according to the IEA. Birol noted that the situation in natural gas markets is also quite difficult, and Asia is the most affected region.

“There are few options to replace missing LNG cargoes from Qatar and the Emirates,” he said. “Global energy supply has decreased by approximately 20%.”

The IEA’s announcement came a day after energy ministers from the Group of Seven – the leading industrialized nations of Canada, the US, France, Italy, Japan, Germany and the UK – met in Paris to look for ways to lower prices. This also comes just before G7 leaders, including US President Donald Trump, meet via video conference on Wednesday.

In his introductory remarks during a video call on Wednesday, French President Emmanuel Macron praised the IEA’s decision to release emergency oil stocks, saying it was “very important” to do everything possible to increase global production and that 400 million barrels were equivalent to “20 days of the volume exported through the Strait of Hormuz.”

Macron stated that the IEA decision was prepared at the G7 level and said that the amount committed by the G7 countries alone constitutes 70 percent of the total, including 14.5 million barrels to which France will contribute.

Maksim Sonin, an energy manager at Stanford University’s Hydrogen Initiative, said the release would have a “short-term stabilizing effect” but would diminish if the war continued and the Strait of Hormuz remained essentially at a standstill.

“It’s not a magic bullet that will solve everything,” Sonin said. “You need to solve the underlying problem.”

Neil Crosby, vice president of oil analytics for Sparta, which tracks oil trading, said the release, no matter how big, represents “a little Band-Aid.”

“This scenario has always been ignored by much of the industry: If we end up in the scenario of war with Iran, the U.S. Navy will ensure that Hormuz does not remain closed,” Crosby said. “Then we got there and it closed… It was a total disaster.”

Oil follows serpentine journeys that can take weeks from drilling sites to gas pumps. It must pass through refineries where it will be converted into fuel before being sent via pipelines and tankers to terminals and from there to gas stations.

Therefore, no single decision has any effect.

But Kenneth Medlock, senior director of Rice University’s Center for Energy Research, said releasing reserves would calm markets, prevent extreme price swings and could lead to lower pump prices next week. However, there is a trade-off with draining reserves.

“You’re now depleting the stock. That’s always the important 22,” Medlock said. “You sell them today, but that means you can’t sell them tomorrow because they’re gone.”

Germany, Austria and Japan said they would release part of the video early Wednesday. oil reserves In response to the IEA’s request for members to release 400 million barrels.

IEA reserves were created in 1974 following the Arab oil embargo, and IEA member countries currently hold public emergency oil stocks of more than 1.2 billion barrels; In addition, 600 million barrels of industrial stock are kept under the government’s obligation.

German Economy Minister Katherina Reiche said the IEA asked Germany to release 2.64 million tonnes (about 19.7 million barrels) of its oil reserves.

He said it would take a few days for the first quantities to be delivered.

“Germany stands behind the IEA’s most important principle of mutual solidarity,” Reiche said.

The German government also announced that it will introduce a measure that will allow gas stations in Germany to increase fuel prices no more than once a day. Reiche said the federal government wants to implement this as quickly as possible.

It was not immediately clear how much oil Austria was emitting.

Price increases at gas stations will only be allowed three times a week in Austria from Monday, Austrian Economy Minister Wolfgang Hattmannsdorfer said. He noted that Austria had released part of its emergency oil reserve and expanded its national strategic gas reserve, adding: “One thing is clear: in a crisis, there should be no winners of the crisis at the expense of commuters and businesses.”

IEA countries have released emergency stockpiles five times before: during the 1990-1991 Gulf War, after Hurricane Katrina in 2005, during the Libyan civil war in 2011, and twice after the Libyan Civil War in 2011. Russia’s invasion of Ukraine.

Grieshaber reported from Berlin. Associated Press reporters Matt Sedensky and Cathy Bussewitz in New York and John Leicester and Sylvie Corbet in Paris contributed to this report.