The International Energy Agency on Wednesday agreed to release a record 400 million barrels of oil in an attempt to lower prices amid severe supply disruptions from the war in Iran.
Its 32 member countries – mostly in Europe, North America and northeast Asia – did not set a timeline for the release, which is more than double the prior record of 182 million barrels from 2022 following Russia’s invasion of Ukraine.
“The conflict in the Middle East is having significant impacts on global oil and gas markets, with major implications for energy security, energy affordability and the global economy for oil,” IEA Executive Director Fatih Birol said Wednesday.
Out-of-service signs seen at a gas station in Cambridge, England. AFP via Getty Images“I can now announce that IEA countries have unanimously decided to launch the largest-ever release of emergency oil stocks in our agency’s history.”
Energy benchmarks have whipsawed in the weeks since the start of joint US and Israeli air strikes on Iran, with West Texas Intermediate crude hitting $87 and Brent crude, nearly $92 on Wednesday.
The price of oil has surged as much as 40% – earlier this week nearing $120 a barrel – since the war broke out on Feb. 28.
The IEA announced the historic release of reserves as an attempt to counteract Iran’s blockage of the Strait of Hormuz, a vital maritime route that sees 20% of the world’s oil supply pass through.
The release is intended to help calm the immediate effects of the supply shocks – but is necessary for tanker traffic to resume through the strait to stabilize oil and gas flows, Birol said Wednesday.
A potential blockade of the strait is the kind of scenario that the IEA was created for in 1974 after the Arab oil embargo.
Gas prices seen at a gas station in New York City Tuesday. APMembers of the group currently hold more than 1.2 billion barrels of public emergency oil stocks, along with an additional 600 million in mandatory commercial inventories.
While a substantial release of reserves is expected to temporarily ease price pressure on oil, there aren’t enough inventories in the world to completely make up for the Middle East supply, according to experts.
The war has slashed the supply of global liquified natural gas, or LNG – a form of natural gas used for electricity and heating that can be loaded onto tankers – by 20%, forcing Asian and European regions to compete with one another for energy, Birol said.
The IAEA is headquartered in Vienna, Austria. APA/AFP via Getty Images
An illustration showing the impact of the airstrikes in the war against Iran by the Strait of Hormuz.
Iraq and Kuwait have reportedly started shutting down production from their oil fields and attacks have begun to damage energy-related infrastructure throughout the Middle East. It takes time for the systems to come back online, which means oil prices could remain elevated for longer even if the attacks end soon, experts say.
Tehran has reportedly started laying mines in the strait, which could also extend the halt on tanker traffic through the waterway.
In the meantime, national average gasoline prices had jumped to $3.58 a gallon as of Wednesday, according to AAA – a more than 10% increase over the past week.
