The Wall Street Journal reported that the International Energy Agency (IEA) has proposed the largest release of oil from its strategic reserves in history. The move aims to curb crude oil prices, which have surged sharply during the U.S.-Israeli war on Iran.
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Sources clarified that this quantity would exceed the 182 million barrels released by IEA member states in two stages in 2022, following Russia’s full-scale invasion of Ukraine. The proposal was presented during an emergency meeting of energy officials from the IEA’s 32 member nations.
A decision regarding the proposal is expected this Wednesday. It will be adopted if no objections are raised; however, an objection from a single country could delay the plan, according to the journal’s sources.
The IEA proposal aims to counter the massive disruption caused by the near-total closure of the Strait of Hormuz, the narrow waterway connecting the Arabian Gulf to global markets. Approximately one-fifth of the world’s daily oil supply passes through the Strait, and the threat of Iranian attacks on tankers has brought shipments to a near standstill.
Iranian attacks on tankers transiting the Strait are among the scenarios that prompted Western nations and their allies to establish the IEA in 1974 following the Arab oil embargo. The agency, a collective of Western nations and allies, sets guidelines for the amount of crude oil member states must maintain in their reserves and coordinates releases to shield their economies from market disruptions.
Since February 28, when the U.S. and Israel launched their initial strikes on Iran, oil prices have jumped by as much as 40%, surpassing $100 before dipping this week as traders await statements from President Trump regarding the duration of the war. Oil concluded today’s trading below $84, while other fuels, such as diesel, continued their sharp ascent.
Economists warned that sustained high oil prices pose a risk of inflation and a stock market correction, in addition to higher fuel costs for drivers.
IEA Executive Director Fatih Birol stated on Monday that member nations hold 1.2 billion barrels in public stocks, with an additional 600 million barrels in mandatory commercial stocks. Roughly calculated, this is equivalent to about 124 days of lost supplies from the Gulf.
Previous strategic reserve releases have yielded mixed results.
IEA members conducted two consecutive releases after the Russian invasion of Ukraine in early 2022. This move initially caused oil prices to rise by 20%, as traders viewed it as a signal that the oil crisis was more severe than anticipated. However, analysts say the releases eventually contributed to lowering prices.
One particularly successful release occurred in 1991 under then-U.S. President George H.W. Bush. Preparing for Operation Desert Storm, Bush authorized the first withdrawal from the Strategic Petroleum Reserve (SPR) on the same night the U.S.-led coalition launched its attack on Iraq. IEA nations joined this effort by drawing further from their stocks, following a plan established prior to the invasion.
Prices plummeted by more than 20% on the first day of the U.S.-led offensive. By the time coalition forces entered Iraq and Kuwait in February, oil from the strategic reserve was already available on the market.
