Can tapping oil reserves tame the Iran war price shock?

As conflict chokes off oil exports from the Persian Gulf, governments around the world have a critical line of defence against price shocks: Emergency stockpiles such as the US Strategic Petroleum Reserve (SPR), created in the 1970s as a safety net against energy crises. 

Oil and gasoline price spikes prompted by the war with Iran have created pressure on President Donald Trump and other world leaders to tap these special facilities. 

HOW BIG ARE EMERGENCY OIL STOCKPILES

The 32 countries that belong to the International Energy Agency (IEA) collectively have at least 1.2 billion barrels of oil put aside in emergency public stores, according to the group, which oversees coordinated stockpile releases. The IEA, which is based in Paris, has helped implement five such interventions: In the buildup to the 1991 Gulf War, after hurricanes Rita and Katrina in 2005, following the outbreak of civil war in Libya in 2011, and twice in 2022 in response to disruptions connected to the war in Ukraine. 

Among IEA members, the US has the largest buffer, which is made up of four heavily-guarded sites along the Gulf of Mexico. These deep and massive underground caverns have the capacity to hold more than 700 million barrels of oil. 

According to Energy Department data, they currently hold about 415 million barrels, so they are just 60 per cent full, having been depleted in a record drawdown by then-President Joe Biden following Russia’s attack on Ukraine. 

China – the world’s biggest oil importer – has in recent years built up what appears to be an even larger reserve capacity. The country has about 1.4 billion barrels of crude in strategic storage, according to estimates from Columbia University’s Centre on Global Energy Policy. 

WHAT’S THE CURRENT DISCUSSION ABOUT TAPPING OIL RESERVES?

Finance ministers from the Group of Seven said on Mar 9 that while they’re prepared to deploy strategic oil reserves, they hadn’t reached the point of taking action. Trump has been reluctant to release oil from the US reserve. He and his Energy Secretary Chris Wright have characterised high energy prices as temporary. 

As for other countries, Japan instructed oil storage bases to make preparations for a release, Nikkei reported, indicating the country might proceed independently, though the government said no decision had been made. India said on Mar 9 that it wasn’t planning to tap its buffer.