The 31 member countries of the International Energy Agency agreed Tuesday to release 60 million barrels of oil from their strategic reserves, half of which will come from the United States, “to send a strong message to oil markets” that supplies will not be shortened following Russia’s invasion of Ukraine.
At an unusual meeting of energy ministers headed by US Energy Secretary Jennifer Granholm, the board of the Paris-based IEA reached the decision. She added in a statement that US President Joe Biden has authorized a 30-million-barrel pledge and that the US is prepared to “take additional actions” if necessary.
“Our collective resolve to confront major market and supply problems caused to President Putin’s assault on Ukraine” is reflected in the group’s decision, according to Granholm.
As the world’s third-largest oil producer, Russia plays a significant role in global energy markets. Its daily crude exports of 5 million barrels account for nearly 12% of world oil trading. A total of 60% of the product is sent to Europe, with the remaining 20% going to China.
So far, sanctions imposed by the United States and Europe have not prohibited oil or gas exports, and they have provided exceptions for transactions used to pay for oil and gas. At a time when global energy markets are tight and high prices are stoking inflation in rich nations, Western officials are hesitant to restrict Russian oil supplies.
However, the invasion has shook markets all across the world. Oil prices rose on Tuesday, with benchmark crude in the United States hitting $106 per barrel for the first time since 2014.
“The situation in the energy markets is really severe and requires our entire attention,” said Fatih Birol, executive director of the International Energy Agency. “Global energy security is in jeopardy, putting the global economy at risk at a critical juncture in its recovery.”
The International Energy Agency (IEA) said last month that world oil consumption in the fourth quarter of 2021 was 100.2 million barrels per day. As limitations to curb the spread of COVID-19 are removed, demand is anticipated to rise to an average of 100.6 million barrels per day this year, according to the IEA.
Other members of the organization include Germany, France, the United Kingdom, Japan, and Canada, in addition to the United States. 1.5 billion barrels of oil are held in emergency stocks by IEA members. For 30 days, 4% of inventories will be released, or nearly 2 million barrels per day.
Since the reserves were formed in the aftermath of the Arab oil embargo in 1974, this is just the fourth time the IEA has done a coordinated drawdown.
The price of crude oil influences a large chunk of what drivers spend to fill up their automobiles with gasoline in the United States. According to the motor club association AAA, the national average for a gallon of petrol is $3.61, which is 26 cents more than a month ago and 90 cents higher than a year ago.
The United States bought around 245 million barrels of crude oil and petroleum products from Russia in 2021, up 24% from 2020. According to figures from the US Energy Department’s statistical arm, Russia accounted for over 8% of US crude oil and petroleum product imports in that year.
Biden announced a 50 million barrel oil release in November in concert with other energy-importing countries, but the move had only a temporary impact on oil prices, which have continued to increase.
The newest SPR release, according to Stewart Glickman, an energy analyst for CFRA Research, will only be somewhat useful since most of the stocks are light oil, whereas the US purchases a higher grade of oil from Russia.
“Refiners plan around a certain blend of crudes, so it’s not always easy to substitute one for another,” he explained.
Granholm emphasized the importance of investing in renewable energy to lessen reliance on Russian oil and natural gas.
Sen. Joe Manchin of West Virginia, a Democrat, called on Biden and the oil sector to take swift action, including “banning crude oil imports from Russia.”
“If there was ever a moment to be energy independent, it is now,” Manchin said, citing the importance of fossil fuels like coal and natural gas in his state’s energy production.