The Group of Seven (G7) advanced economies has announced a coordinated release of 100 million barrels of oil and diesel to ease supply concerns that have caused prices to skyrocket. This move, which will begin immediately and last for four months, aims to stabilize energy supplies, build resilience in supply chains, and shield households and businesses from price shocks. The G7 includes the US, UK, Canada, Japan, Germany, Italy, and France, with the EU also represented at its meetings.
The decision to release oil and diesel from reserves was made after US President Donald Trump threatened to ban diesel exports from the US if European countries did not agree to put more of their own stocks onto the market. Trump had argued that US farmers, truckers, and businesses should not be left carrying the burden of rising prices. However, after a meeting of G7 leaders, French President Emmanuel Macron said the bloc had agreed to release reserves of up to 100 million barrels within four months under the coordination of the International Energy Agency (IEA).
The release of oil and diesel will comprise a mix of crude oil and diesel, with a substantial release of diesel within the first 20 days. G7 leaders said they will implement their commitments with a coordinated release through the IEA, including a frontloaded substantial diesel release within the first 20 days by G7 members and partners. The UK was represented at the meeting by Foreign Secretary Ed Miliband, who said the measures would help stabilize energy supplies and shield households and businesses from price shocks.
The price of global benchmark Brent crude oil briefly dropped below $100 a barrel after the announcement, but rose back to around $102 by Friday evening. Oil prices had risen due to renewed strikes between Saudi Arabia and the Houthis in Yemen. Matt Smith, director of commodities research at Kpler, said oil had risen again due to rumors of Saudi Arabia planning an offensive into Yemen as it looks to re-establish a safe path via Bab-Al Mandeb.
The G7 leaders also agreed to coordinate maintenance schedules to avoid multiple refineries being shut down at the same time, while encouraging countries with the capacity to do so to ramp up refining of diesel in particular. This move aims to address the constraints in diesel supplies, which have been heavily impacted by the conflict in the Middle East and reduced supplies from Russia and China.
The release of oil and diesel from reserves will offer significant relief to countries that are reliant on imports of the fuel, including the UK, where prices at the pump topped £2 a liter for the first time on Friday. Over half of the UK's diesel is imported, with 31% of those imports coming from the US. The US is one of the world's leading diesel suppliers, with domestic refineries churning out roughly four to five million barrels every day.
The G7 leaders stressed that they will maintain sanctions against Russia amid its ongoing war in Ukraine. Diesel is harder to refine than petrol and, because of its use in the haulage industry and agriculture, it is very difficult to reduce demand. The coordinated release of oil and diesel from reserves aims to bring down the prices of petroleum products, particularly diesel, and provide relief to households and businesses affected by rising prices.
Key points
- The G7 has announced a coordinated release of 100 million barrels of oil and diesel to ease supply concerns and stabilize energy prices.
- The release of oil and diesel will comprise a mix of crude oil and diesel, with a substantial release of diesel within the first 20 days.
- The G7 leaders also agreed to coordinate maintenance schedules to avoid multiple refineries being shut down at the same time.
