Why emergency oil releases won’t fix this crisis
By Chris Isidore, CNN
(CNN) — Investors rattled by the war in Iran have sent oil prices skyrocketing – and global governments have noticed. The world’s biggest economies are now considering emergency releases of millions of barrels of oil into the market.
But while that might sound like a lot, experts say even tens of millions of barrels are more like a drop in the bucket when it comes to global oil needs.
That’s because the world, and the US, uses so much oil every single day that even a relatively large one-time release won’t be able to offset the continued closure of the Strait of Hormuz, a key waterway for global oil shipments that’s been effectively shut down by the war.
“It’s not zero, but the effect is likely to be pretty small,” said Daniel Raimi, a fellow at energy think tank Resources for the Future, on a coordinated release. “When you sort of consider the volume of global oil trade, just around 100 million barrels per day, even a coordinated SPR (strategic petroleum reserve) release will have a modest impact on global oil prices.”
‘We went artificially up’
The G7 group of large economies have hinted they could release oil, but they haven’t committed to anything yet.
“We stand ready to take necessary measures, including to support global supply of energy such as stockpile release,” the G7, which includes Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, said in a statement after a Monday meeting.
Brent crude, the international benchmark, settled up nearly 7% Monday, to $98.96 per barrel, the highest settlement price since 2022.
President Donald Trump similarly made no promises on Monday.
“We’re looking to keep the oil prices down. We went artificially up because of this excursion,” he said at a press conference. “I knew oil prices would go up if I did this, and they’ve gone up, probably less than I thought they’d go up.”
A brief pause?
After Russia’s 2022 invasion of Ukraine drove up oil prices, the G7 coordinated a release of 240 million barrels from their own holdings, including 180 million barrels from the US SPR.
Gas prices did come down from their $5-a-gallon peak in June 2022, but experts say the G7 oil release helped only marginally. An analysis by the Treasury Department in July 2022 found that it only lowered gas prices by 17 cents to 42 cents a gallon.
“If not for the SPR releases, we likely would have had gas above $5 a gallon for a number of weeks (in 2022) rather than just for a few days,” said Tom Kloza, an independent oil analyst and an advisor to Shell Oil.
The most important factor to bring oil prices down now is to reopen the Strait of Hormuz, which has been virtually shut to tanker traffic. Twenty percent of the world’s oil flows through the narrow channel.
“Unless the Strait of Hormuz traffic resumes soon and continues, SPR releases will just cause a brief pause before crude oil prices resume marching higher,” said Bob McNally, president and founder of Rapidan’s Energy Group.
With global oil consumption at about 100 million barrels per day, no one-time release can make up for closing the strait for an extended period of time.
And if the war drags on, releasing SPR oil today will limit future options.
America’s SPR had about 600 million barrels of oil heading into the Ukraine war. Today, it stands at 415 million barrels.
“The thing about the emergency stockpiles is you can only use them once,” said Neil Atkinson, visiting fellow at the National Center for Energy Analytics. Without replenishment, “when they’re gone, they’re gone.”
CNN’s Matt Egan and David Goldman contributed to this report
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