High energy prices: States are tapping into oil reserves

The USA and several other countries have released part of their emergency reserves because of the high oil prices. Germany is probably not involved in this strategic alliance.

In view of the soaring energy prices, US President Joe Biden today ordered the release of 50 million barrels of oil from the strategic reserve. According to the President’s Office, China, India, Japan, South Korea and Great Britain are also participating in the action. The aim is to lower prices for end consumers and to balance out the disparity between demand and supply. “The president has worked with countries around the world to address the post-pandemic supply shortage,” said the office of the President. Biden is under pressure in view of the comparatively high inflation and falling approval ratings in the population.

Even before the official announcement, prices had dropped somewhat. In the morning, a barrel (159 liters) of North Sea Brent cost 79.04 dollars. That was 66 cents less than the day before. However, in response to news of the release, oil prices rose again. A barrel of the American variety West Texas Intermediate (WTI) again cost more than $ 77 in the afternoon – after just under $ 76 before. Apparently traders assumed that the states released less oil than expected. There was also speculation about a possible retaliatory action by the OPEC states.

China is also there

For days, market participants had been preparing for a coordinated release of national oil reserves, which is intended to slow down or even put an end to a further increase in prices, which have risen to multi-year highs. It was expected that other large consumer countries would also join the campaign.

“We are considering what we can do, provided that Japan coordinates with the United States and other affected countries,” said Prime Minister Fumio Kishida on Saturday from the news agency Kyodo quoted. China had previously announced that it would tap its state oil reserves. “We are working on releasing crude oil reserves,” said a spokeswoman for the responsible authority of the news agency Reuters. The world’s largest oil importer had already tapped state reserves in September and auctioned 7.38 million barrels to domestic refineries.

“A coordinated action certainly has a greater impact on the oil market than if only the USA would go this way alone,” explained Commerzbank raw materials analyst Daniel Briesemann.

German emergency supplies of more than 30 million tons

And Germany? The Federal Ministry of Economics responsible for the oil reserves did not want to comment on request. “We take note of the reports from the USA and follow them closely. I can not comment on them,” said a spokeswoman. The Ministry also points out that the regulations on oil stocks are based on agreements with the International Energy Agency (IEA). Germany has not yet been addressed at this level. It remains unclear whether the US has made inquiries with the federal government.

In total, Germany has its own reserves of around 32 million tons of crude oil. One ton corresponds to around 7.14 barrels. The stocks are stipulated by law and should guarantee supply for at least 90 days in the event of shortages and crises. The reserves are located in so-called cavern storage facilities in Lower Saxony, some of them at a depth of 1,000 to 1,500 meters underground. Some of them are also stored above ground in tank containers. The stocks were introduced in 1966. In 1975 the storage obligation was set at 90 days in accordance with the specifications of the IEA.

Reserves already released three times

Most recently, parts of the oil reserves were tapped in 2011 after Libya failed as an oil exporter due to the unrest there. The reserves were also released in 1991 during the Iraq-Kuwait crisis and in 2005 after Hurricane Katrina. The Ministry of Economic Affairs may release the stocks in order to remedy or avoid disruptions in the supply. The Hamburg-based oil storage association EBV is responsible for the management and storage of the oil reserves.

According to the German mineral oil association Fuels und Energie, participation in an alliance for the use of oil reserves would have no significant impact on pricing. In view of the daily global demand of a good 90 million barrels (one barrel of crude oil contains 159 liters), the domestic reserves are simply too small. The German reserves are also designed to bridge emergencies and not affect global pricing. Commerzbank expert Briesemann is also of the opinion that it “didn’t make much sense” for Germany to take part in the campaign because the stocks are too small and only intended for serious supply disruptions.