Reported by: Mark Hallam with AFP, dpa, Reuters | Edited by: Richard Connor
Coordinated efforts to keep oil prices and fuel prices at filling stations in check began to emerge on Wednesday in Germany and elsewhere.
The moves come amid the fast-rising prices caused by the attacks on Iran and wider conflict in the region.
Germany, Austria, Japan, France, Spain all signal movement
German Economy Minister Katherina Reiche called a lunchtime press conference in Berlin, a day after Finance Minister Lars Klingbeil had said the government was open to releasing some of its reserves.
Reiche told reporters that the IEA had asked its members to free up 400 million barrels of oil in total from national reserves.
“We will meet this request and do our part, because Germany stands behind the most important tent of the IEA, collectively solidarity,” Reiche said. She said Germany planned to contribute 2.4 million metric tons of oil in total. Reiche said that although there was no shortage in Germany at present, the legal requirement for releasing reserves, this was the case in other parts of the world already.
At around the same time, Austria’s government said it would limit increases in diesel and gasoline prices at fuel stations to once per day and that it would take part in international plans to release some of the oil reserves.
Japan’s government issued a similar statement, with one of the worse-hit countries saying it would not wait for others and would start releasing reserves as early as Monday.
“Without waiting for a formal decision on coordinated international stock releases with the IEA, Japan has decided to take the lead in easing supply and demand in the international energy market by releasing strategic reserves as early as the 16th of this month,” Prime Minister Sanae Takaichi Takaichi told reporters on Wednesday.
French Economy Minister Roland Lescure said that the flurry of announcements “are without any doubt part of an extremely coordinated approach.”
After talks between G7 ministers on Tuesday, experts at the International Energy Agency (IEA) were charged with debating the pros and cons of releasing some oil reserves and presenting their findings to EU and Western governments.
Spanish Energy Minister Sara Aagese said that the recommended release from the IEA would be more than twice as large as the release at the beginning of Russia’s full scale invasion of Ukraine four years ago.
Germany following ‘Austrian model’ to limit filling station price hikes
Reiche also told reporters in Berlin on Wednesday that the government would follow what she called the “Austrian model” and seek to limit fuel station operators to just one price increase each day.
She said she was trying to counter what Germany’s cartel office has described as the “rocket and feather effect” in its investigation of pricing practices. It had argued that opportunistic filling stations would increase prices like a “rocket” taking off as the base oil price rose, but then only reduce them again like a “feather” falling back to earth.
“Fuel prices rise amid higher crude oil costs extremely quickly, the rocket, and then sink again amid falling costs only very slowly, the feather. We want to break through this mechanism,” Reiche said.
There will be no limitations on how often petrol stations can reduce their prices.
Reiche however did not specify when this change would come into force. She said it would first require alterations to existing German cartel laws. She said the coalition government parties would try to identify an existing legislative bill to which the move could be attached, in a bid to expedite its passage in parliament.
How much oil is being released, where do prices currently stand?
Reuters news agency reported, citing IEA sources, that the plan was to initially release 100 million barrels, as part of a broader move to release 400 million barrels over time.
After Russia’s invasion of Ukraine, 183 million barrels were released from national reserves in two tranches, first in March and again in April of 2022, with Germany releasing almost 6.5 million barrels at that time.
Oil prices have risen fairly sharply since the attacks on Iran and the subsequent fighting in the Gulf region, with oil deliveries through the Strait of Hormuz severely impacted.
However, prices are fairly far adrift of the highs of more than $100 per barrel they had reached early on Monday. As of Wednesday morning, a barrel of Brent Crude was selling for roughly $90 (roughly €77.50), compared to roughly $68 the same time last month. Fuel prices have risen at filling stations in most of the world as a result.
What rules govern German oil reserve releases?
An organization called the Petroleum Stockpiling Association controls Germany’s oil reserves and answers to the Federal Minisrtry for Economic Affairs and Energy.
It is required to ensure that German maintains reserves equivalent to 90 days of its net oil imports; in other words, enough oil to offset a three-month period where no oil imports at all are possible.
When selling reserves, it must charge market prices.
Germany only imported around 6% of its crude oil from the Middle East last year, according to figures published this week, with Norway, the US, Libya, Kazakhstan and the UK its top five providers.
The main criterion to be taken into account when deciding whether to release supplies is whether there is “a disruption to the physical supply of petroleum/petroleum products.” It is not permissible to release reserves with the primary intention of reducing prices, rather to control and manage supply and availability.
Disclaimer: This report first appeared on Deutsche Welle, and has been republished on ABP Live as part of a special arrangement. Apart from the headline, no changes have been made in the report by ABP Live.
