An international body has agreed to release 400 million barrels of emergency oil. It will be the world’s largest-ever emergency stockpilerelease.
Since the U.S. and Israel launched strikes on Iran, it has closed the Strait of Hormuz, which is the world's busiest oil shipping channel.
In response, the International Energy Agency (IEA) said its 32 memberstates, including Australia, haveagreed to the unprecedented oil release.
The Australian Government says it is “finalising its response,” but that Australian oil will stay in the country.
Strait of Hormuz
Amid the escalating conflict in the region, Iran closed access to the Strait of Hormuz, a 33-kilometre-wide shipping lane off its southern border.
Each day, an average of 20 million barrels of oil and liquefied natural gas (used to heat homes and generate electricity) is shipped through the Strait – around 20-25% of global supply.
Last week, major shipping companies announced they will stop using the Strait of Hormuz and reroute ships around the Cape of Good Hope, the southernmost point of Africa.
The new route adds thousands of kilometres to each shipment’s journey.
Meanwhile, multiple ships remaining in the Strait have been attacked by Iran’s Islamic Revolutionary Guard Corps (IRGC), including a Thai-registered cargo ship.
On Wednesday, U.S. CentralCommand (CENTCOM) said it struck 16 Iranian vessels in the Strait, which it said had the ability to deployexplosive mines in the water.
That day, U.S. President Donald Trump told reporters he thinks oil companies should pass through the Strait anyway.
Price impact
Oil is bought and sold all over the world, which means prices are set globally. A disruption in one part of the world can affect prices everywhere.
An example of a previous disruption is Russia’s invasion of Ukraine in 2022.
Much of Europe had relied on Russian oil and gas up to that point. In protest of the invasion, European countries sought to buy less Russian oil and gas, while Russia reduced itssupply.
The same amount of demand metlower supply to drive up prices.
Before the current U.S-Iran conflict, oil was sitting at around $US67 ($AU94) a barrel (159 litres).
On Wednesday (U.S. time), the price of a barrel was around $US90.
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Last week, some oil-producing nations, such as Saudi Arabia and Russia, agreed to increase oil supply by 206,000 barrels a day to help ease global supply.
This week, the IEA said oil export volume through the Strait is “currently at less than 10% of pre-conflict levels.“
Announcement
On Wednesday, the IEA announced its 32 member nations had unanimously agreed to release 400 million barrels of oil from itsemergency stockpile. It is the sixth release in IEA’s history, and reduces the 1.2 billion-barrel stockpile by a third.
Members include Australia, the U.S, South Korea, Canada, the UK, Türkiye, and Japan.
IEA Executive Director Fatih Birol called the market challenges“unprecedented”.
“Oil markets are global so the response to major disruptions needs to be global too,” he said.
Australian impact
A spokesperson for Energy Minister Chris Bowen told TDA “Australia is finalising its response.”
The spokesperson noted the agreement is “voluntary” to allow countries to work out how best to respond.
If Australia joins the action “it will not be required to send fuel overseas” but would “use its existing domestic reserves to take pressure out of the global market,” the spokesperson said.
Resources Minister Madeleine King told ABC Radio National on Thursday morning that Australia’s supply “doesn’t go anywhere because of this request” and will remain in the country.
Bowen confirmed on Thursday that Australia has a supply of 36 days of petrol, 32 for diesel, and 29 of jet fuel.
Shadow Climate Minister Dan Tehan’s spokesperson told TDA “the Coalition supports the unanimous decision of the IEA”.
Shadow Defence Minister James Paterson told Sky News the decision was “welcome” but will have a “modest and temporary impact” on prices.
Fuel changes
Bowen also announced on Thursday that he will “temporarily amend” the country’s standards for fuel quality.
For two months, fuel will have more sulfur, keeping 100 million litres of petrol per month in thedomestic supply rather than being exported for blending.
Bowen said Ampol Australia will prioritise sending fuel to “regions of shortage” in return, to supportregional communities, and the farming and fishing industries.
