How record release of oil reserves can stabilise price of ‘liquid gold’ worldwide

Dubai: Global oil markets have been under pressure as tensions in the Middle East disrupt shipments and threaten supply routes. A new move by the International Energy Agency aims to stabilise prices.

The IEA said it will release 400 million barrels of oil from emergency reserves, the largest coordinated release in its history. The decision was taken by its 32 member countries to help offset disruptions to global energy supplies.

Why did oil prices surge

Oil prices rise quickly when markets fear supply shortages. Recent tensions in the region have disrupted oil flows from the Gulf. Iran has targeted shipping and energy infrastructure and has effectively halted cargo traffic through the Strait of Hormuz.

About one-fifth of the world’s oil shipments normally pass through this narrow waterway linking the Arabian Gulf to the Indian Ocean. According to the IEA, exports of crude and refined products from the region have fallen to less than 10% of pre-war levels.

When supply drops this sharply, traders expect shortages. Prices rise as buyers compete for limited oil.

Releasing reserves calm all

Emergency oil reserves act as a backup supply for the global energy system. IEA member countries collectively hold over 1.2 billion barrels of government oil reserves, plus another 600 million barrels of industry stocks held under government obligations.

Releasing oil from these reserves increases supply in the market. More available oil means:

• Less risk of shortages

• Reduced panic buying in energy markets

• Lower pressure on crude prices

Even before the oil physically reaches markets, the announcement itself can calm traders by signalling that governments are ready to intervene.

Release is unusually large

The planned release of 400 million barrels is the biggest coordinated action ever taken by the IEA. The previous record was 182.7 million barrels, released in 2022 after Russia’s invasion of Ukraine disrupted global energy supplies. The size of the current release reflects the scale of disruption facing global oil markets.

Countries release oil reserves

Several countries have already begun implementing the plan:

• Germany and Austria said they will release parts of their national reserves.

• Japan said it will begin releasing some of its oil reserves from Monday.

Energy ministers from the Group of Seven industrialised nations said they support using strategic reserves to address the current energy situation.

Impact on people everywhere

Oil is priced globally. When supply disruptions push prices higher, the effects are felt worldwide. Stabilising oil prices helps:

• Reduce volatility in global fuel markets

• Limit spikes in petrol and diesel prices

• Maintain stable energy supply for businesses and transport

For energy-producing regions like the Gulf, stabilising markets also helps maintain confidence in global energy trade routes and supply chains.

The IEA created its emergency oil reserve system in 1974, after the Arab oil embargo triggered a global energy crisis. Since then, the reserves have been used during major disruptions such as the wars in Iraq and Libya and the energy shock following Russia’s invasion of Ukraine.

The current release is intended to play the same role: adding supply to global markets and helping bring prices back toward more stable levels.