The United States and other world powers have agreed to release 60 million barrels of oil from their strategic reserves, a move intended to reduce gasoline prices that have climbed rapidly in recent weeks, according to the International Energy Agency.
With crude oil prices climbing to well over $100 a barrel — and with some industry analysts predicting prices could hit $130 — the energy agency said its intent is to “send a unified and strong message to global oil markets that there will be no shortfall in supplies as a result of Russia’s invasion of Ukraine.”
The IEA release is only the fourth time the international organization has overseen a coordinated drawdown of reserves since it was created in 1974, when Arab members of the Organization of the Petroleum Exporting Countries (OPEC) declared an oil embargo after the Arab-Israeli war. In its announcement Tuesday, the IEA said its initial release is equivalent to 2 million barrels a day for 30 days.
“I am pleased that the IEA has also come together today to take action. The situation in energy markets is very serious and demands our full attention,” IEA Executive Director Fatih Birol said. “Global energy security is under threat, putting the world economy at risk during a fragile stage of the recovery.”
The U.S. Energy Department plans to release 30 million barrels of oil from the Strategic Petroleum Reserve, one of the most aggressive steps available to the White House as it tries to reduce fuel costs for consumers. In separate statements issued Tuesday, Energy Secretary Jennifer Granholm and White House press secretary Jen Psaki suggested that the Biden administration might release more.
The United States is “prepared to use every tool available to us to limit disruption to global energy supply as a result of President Putin’s actions,” Psaki said. “We will also continue our efforts to accelerate diversification of energy supplies away from Russia and to secure the world from Moscow’s weaponization of oil and gas.”
The release makes up a small percentage of the nation’s total strategic reserves, which held 582.4 million barrels as of Feb. 22. It marks the second time the Biden administration has tapped the reserve in coordination with other countries. The Energy Department released 50 million barrels of oil from the reserve last November in an effort to reduce global prices.
Oil industry analysts said it’s unclear exactly what effect the release of stockpiled oil will have on prices. The U.S. oil price rose after Tuesday’s announcement, hitting a seven-year high of $106 a barrel.
Uncertainty over how long the war in Ukraine will last and what effect it will have on Russian oil exports has made it difficult for experts to predict how much worse the oil shortage could become in the weeks and months ahead.
Russia is the world’s third-largest oil producer. It exports more oil than any other country — about 5 million barrels a day of crude — and accounts for roughly 12 percent of global trade. Russia also exports 2.85 million barrels a day of refined petroleum products, the IEA said. Its surplus capacity is less than 300,000 barrels a day.
Another factor in the uncertainty over the government oil releases is the response of the Organization of the Petroleum Exporting Countries Plus (OPEC+), which meets Wednesday. Founded in 1960, the OPEC cartel has long been dominated by the oil-rich Saudi kingdom. But five years ago, Saudi Arabia decided to forge OPEC+ — an alliance with Russia, the world’s largest oil exporter, and other producers — in an effort to better control oil prices and production.
An OPEC+ joint technical committee met on Tuesday, saying that the group’s output had fallen short and that international stocks were sharply lower than the average of the previous five years.
Analysts expect the cartel to raise production by a modest 400,000 barrels a day — far below a level that would ease prices and help the economies of the United States, Europe and China. Even within OPEC+, few countries have any surplus production capacity.
Using emergency reserves to replace Russia’s oil exports in the long term is not an option, industry analysts said. But as a short-term response to inflationary pressure and rising gasoline prices, it is expected to make up for supply shortages and either lower prices or prevent them from surging.
Drivers and Americans who depend on oil to heat their homes probably won’t feel the impact of the countries’ decision for several weeks. It takes time for refineries to convert crude oil into gasoline, diesel fuel and other petroleum products and more time for those fuels to reach consumers. In the meantime, experts said, it’s likely that the average price of gasoline in the U.S. will continue to climb.
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