Would that work? As the old joke goes ... it couldn't hurt. And at least one country has already approved the step.
In a few minutes, Emmanuel Macron will host a conference call to discuss a proposal by the International Energy Agency (IEA) to release hundreds of millions of barrels of oil from strategic reserves around the world. This effort would dwarf the response to Russia's invasion of Ukraine four years ago, the Wall Street Journal reports, and would help blunt the spikes in oil prices over concerns about blockades in the Strait of Hormuz:
The International Energy Agency has proposed the largest release of oil reserves in its history to bring down crude prices that have soared during the U.S.-Israel war with Iran, officials familiar with the matter said.
The release of 400 million barrels of oil would more than double the agency’s biggest prior release, when IEA member countries in 2022 put 182 million barrels on the market after Russia launched its full-scale invasion of Ukraine, the officials said. The proposal was circulated at an emergency meeting of energy officials from the IEA’s 32 member countries on Tuesday. ...
Iranian attacks on oil tankers traveling through the strait are the kind of scenario that led Western nations and their allies to create the IEA in 1974 in the wake of the Arab oil embargo. The agency, a club of Western nations and their allies, sets guidelines for how much crude member countries must keep in their reserves and coordinates releases to protect economies from oil-market turmoil.
“We must send a very clear message,” said French Finance Minister Roland Lescure. “If we can’t reopen the Strait of Hormuz right away, we will replace it with other oil.”
Japan has already decided to act, WSJ's Tokyo bureau reports:
Japan will unilaterally release oil from its strategic reserves to boost supply and keep a lid on price increases, Prime Minister Sanae Takaichi said Wednesday.
Takaichi said Japan will release 15 days' worth of oil from private-sector stockpiles and another 30 days' worth from government reserves. The release could start as soon as March 16, she said in a television broadcast.
According to the chart accompanying this report, that would amount to a little less than half of Japan's current reserves. Japan has the third-largest IEA reserve in the world, measured by days of imports held. The Netherlands has the largest by far, with 400+ days of imports in reserve, followed by South Korea and Japan, who each currently hold a little over 200 days' worth of imports in their strategic reserves. Most of the rest of the IEA members have over 100 days of reserves, except for Australia. (The US is a net exporter and is not included in this chart, although we also hold a strategic reserve.)
Just how well could this cushion the global supply? According to the WSJ, IAE members have over 1.8 billion barrels in combined strategic and commercial reserves, enough to cover four months of supply from the Gulf. It's highly unlikely that this will continue for more than another few weeks, and it may take that long to get the reserves fully onto the market. Just the news that the releases will add to the supply would likely be enough to lower prices on futures trading, though.
Let's not forget that the Saudis and the UAE have another way to get oil out of their production facilities, too. This option has two problems, however. First off, it doesn't fully replace the capacity provided by tankers using the Strait of Hormuz. Second, Iran is well aware of these options, and may start targeting them if the US and Israel can't destroy their missile and drone capacity soon:
Two pipelines built just for the occasion—one in Saudi Arabia and one in the United Arab Emirates—bypass the Strait of Hormuz. They are the only ways to get a significant amount of oil out of the Persian Gulf into world markets.
The pipes can’t replace the flows carried by tanker ships, but their use is almost all that is preventing an even worse crisis from unfolding. Saudi Arabia in particular is pumping as much crude as possible through its pipeline to its Red Sea port of Yanbu, built in the early 1980s when the Iran-Iraq War threatened shipping in the Persian Gulf. ...
As long as oil is flowing through them, at least some crude can reach buyers while more than 1,000 ships are stuck in the Persian Gulf. The smaller Emirati pipeline transports crude from Abu Dhabi to the port of Fujairah on the Gulf of Oman.
“If you suddenly see two very large crude carriers coming out of Yanbu and one out of Fujairah, there is a psychological effect that at least some oil is coming out,” said Adi Imsirovic, a former trader and lecturer at the University of Oxford. “What really worries me is that it’s not particularly difficult to target those pipelines.”
That's why a significant release from the IEA would matter. It sounds as though they will propose enough of a release to cover the six weeks of disruptions that Donald Trump and Pete Hegseth have suggested. If the Saudis and UAE can keep output boosted from those pipelines, we may not see much of a disruption at all. The US could act to step up our own exports, and of course, Trump has promised to get a boost from Venezuelan oil output in the near future as well from the newly cooperative Delcy Rodriguez in Caracas.
So far this morning, crude futures are up, but those markets don't appear panicked either. Brent crude rose to $90.84 a barrel, and general crude futures (April) ticked up to $86, but it's been fluctuating between $82-89 today. Buyers may be waiting to see whether the IEA decides to defang Iran before making any significant moves.
Update: Iran declared earlier today that shipping in the Strait of Hormuz is a legitimate target in this war. The US responded by sinking 16 minelayers near the Strait:
US forces obliterated several Iranian navy vessels — including 16 minelayers — near the Strait of Hormuz on Tuesday as President Trump warned the Islamic Republic against planting explosives along the critical global trade route.
The strikes came amid reports that Iran had already begun laying mines along the vital shipping lane — which carries about 20% of the world’s oil supply — despite Trump’s demands that it remain open and unaffected as tensions with the US and Israel escalate. ...
Even after having more than 50 Iranian naval vessels destroyed, Tehran still has over 80% of its small boats and mine-layers to seed the strait with traps — a move that started Tuesday, CNN reported.
While the exact size of the nation’s mine stock is unknown, previous estimates suggested the Islamic Republic has access to roughly 2,000 to 6,000 hidden sea explosives on hand.
The US Navy has plenty of technology and resources to address mines in shipping lanes, but remediation is tedious work. It's much more efficient to simply sink anything that sails out of Iranian ports, and even more so to destroy the ports themselves. One has to suspect that the next strategy for US naval resources in the Persian Gulf will focus on those targets. It might be time to seize Kharg Island too, and make sure Iran understands that we are playing for keeps.
Editor’s Note: Thanks to President Trump and his administration’s bold leadership, we are respected on the world stage, and our enemies are being put on notice.
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