Energy Crisis: G7 Considers Releasing Oil from Reserves

Finance ministers of the G7 group are discussing a possible joint release of oil from strategic reserves, coordinated by the International Energy Agency (IEA), at an emergency meeting on Monday aimed at curbing the sharp rise in oil prices following the conflict in the Persian Gulf. Ministers and Fatih Birol, the executive director of the IEA, held a phone meeting on Monday to discuss the impact of the war with Iran, according to sources familiar with the situation, including one senior G7 official, as reported by the Financial Times.

Three G7 countries, including the U.S., have so far expressed support for this idea, according to sources familiar with the discussions. The 32 IEA member countries hold strategic reserves as part of a joint emergency system designed for oil price crises. One person said that some U.S. officials believe that a joint release in the range of 300 to 400 million barrels, which is 25 to 30 percent of the total 1.2 billion barrels in reserves, would be appropriate.

The meeting comes at a time when U.S. President Donald Trump is facing pressure to stop the sharp rise in crude oil prices since the start of the war. The average price of gasoline in the U.S. rose to $3.45 per gallon by Sunday, up from $2.98 a week ago, and further increases are expected if Trump fails to reverse the trend. The increase in oil prices over the past week has had global repercussions and threatens a new wave of inflation that could harm economic growth worldwide in the long term.

China, India, South Korea, Japan, Germany, Italy, and Spain are among the largest importers of crude oil, making them particularly vulnerable to price shocks. Brent, the international benchmark for oil prices, surged nearly 30 percent during Asian trading on Monday to $119.50 per barrel, but later fell and traded around $102, which is about 10 percent higher following news of the G7 meeting. U.S. benchmark West Texas Intermediate rose 31 percent to $119.48 before falling to around $100, also about 10 percent higher.

Emergency oil stocks were established as part of the founding of the IEA in 1974 following the Arab oil embargo, which led to a sharp rise in prices and significant fuel shortages in the Western world. The reserves are designed to allow major oil consumers to respond to severe energy shocks. Since the organization’s founding, IEA members have jointly released reserves five times. The last two times were in 2022, to mitigate the rise in oil prices following Russia’s invasion of Ukraine.

Stocks for a Month

On Tuesday, the IEA held an emergency meeting to consider options for addressing the emerging oil supply crisis. A document prepared for the meeting states that the IEA is ‘ready to act to support the stability of the oil market.’ A confidential document states that IEA countries hold more than 1.24 billion barrels of public reserves, along with about 600 million barrels of industrial stocks that could also increase supply in the market if necessary. These stocks can cover nearly a month of total oil demand in IEA countries and more than 140 days of net imports, the document states. The U.S. and Japan together account for about 700 million barrels of the total 1.24 billion barrels.

The sharp increase in oil prices threatens to undermine Trump’s promise to reduce inflation and lower energy costs. He is already facing criticism from some Republicans for allegedly spending too much time on foreign policy issues instead of on domestic cost-of-living problems. On the Truth Social platform on Sunday evening, Trump downplayed concerns about rising oil prices.

– Short-term oil prices, which will quickly fall when the Iranian nuclear threat is eliminated, are a very small price for the security and peace of the U.S. and the world. Only a fool would think otherwise – he wrote.

Stock markets across much of Asia fell on Monday in response to the spike in oil prices. U.S. stock markets were also poised for a sharp decline, according to futures indices, which could further increase financial stress in the markets. The decision to consider using strategic oil reserves represents a turnaround for Trump’s administration, which claimed last week that releasing reserves would not be necessary to stabilize the market.

However, energy analysts say that the record rise in oil prices over the past week has left policymakers with little choice but to release strategic reserves in an attempt to calm the markets. In an interview with the Financial Times on Friday, Qatari Energy Minister Saad al-Kaabi warned that the war could ‘collapse world economies’ and predicted that energy exporters from the Persian Gulf could halt production within days.

In a note on Sunday, the analytical firm Rapidan Energy Group warned that IEA members would be ‘under strong pressure to release strategic reserves.’ China, which is not a full member of the IEA, also has large oil reserves that it has built up over the past 12 months. Analysts estimate that Beijing has between 1.1 and 1.4 billion barrels of oil, which could cover up to about 140 days of domestic demand for oil imports.