Germany is releasing part of its strategic oil reserves in response to soaring energy prices triggered by the Iran war. The federal government is acting on a request from the International Energy Agency (IEA), Federal Economics Minister Katherina Reiche (CDU) announced on Wednesday in Berlin. She expects the move to lead to falling fuel prices.
The release is part of a globally coordinated effort. The IEA has asked its member states to release oil reserves amounting to 400 million barrels. "We will comply with this request and make our contribution," Reiche said. Japan also announced it would release its strategic petroleum 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," Japanese Prime Minister Sanae Takaichi told reporters.
France, currently holding the rotating G7 presidency, described the announcements as part of a "highly coordinated strategy." G7 energy ministers said in a statement that they stood ready to take "all necessary measures in coordination with IEA members." Leaders of the G7 were also set to discuss the widespread economic fallout from the Iran war at a video conference chaired by French President Emmanuel Macron.
The release of emergency oil reserves is coordinated by the IEA, which requires its member states to maintain oil stocks equivalent to at least 90 days of their net imports at all times. According to IEA data, Germany held 34.42 million tonnes of oil in reserve as of November last year. Reiche confirmed that several million tonnes will now be released.
A large share of Germany's reserves consists of crude oil, stored primarily in northern Germany according to the Federal Economics Ministry. Diesel, petrol, heating oil, and kerosene stocks are distributed across the country. The specific oil products to be released will be determined in coordination with the IEA, Reiche said.
The 32 members of the IEA hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government mandates.
The crude market has been hit by wild volatility since the United States and Israel began striking Iran at the end of last month, with Tehran retaliating by attacking targets across the Gulf and effectively shutting down the Strait of Hormuz. Japan in particular had pushed strongly for the release of reserves. The country is heavily dependent on oil and gas imports from the Gulf region and has been severely affected by the Strait of Hormuz closure, which has prevented many shipments from leaving the region.
"When such a request is made to all member states, we did not want to show ourselves as unsolidary as the Federal Republic of Germany, but rather to make a contribution," Reiche said. French Finance Minister Roland Lescure underlined the urgency of the situation. "We need to send a very clear message, which is that if we cannot reopen the Strait of Hormuz, we will replace it with other oil that will come from elsewhere and circulate around the world," he told broadcaster BFMTV/RMC.
Reiche described the scale of the decision as "enormous," adding that it represents the largest reserve release in the history of the IEA, exceeding the 182 million barrels released in 2022 following Russia's invasion of Ukraine, according to the Wall Street Journal. She stressed, however, that there is no actual shortage of supply. Japan itself holds large reserves that would last for several more months.
The high prices currently seen on markets are an expression of risk premiums and speculative gains rather than a genuine scarcity of oil. The primary goal for both Tokyo and Washington is therefore to send "a visible signal to the market," Reiche said.
However, analysts have cautioned that the impact may be limited. Ipek Ozkardeskaya, a senior analyst at trading platform Swissquote, noted that 400 million barrels would still be a "meagre" amount compared with the roughly 45 million barrels that IEA countries consume every day.
"It would therefore be a temporary fix," she said, adding that the announcement had helped keep oil prices in check on Wednesday. She also noted that the Middle East is now "pumping less oil, around 6 percent less, in reaction to the Iran war."
Germany is adopting an Austrian-style pricing model for petrol stations, under which fuel prices can only be set once per day and increases during the course of the day are not permitted. Changes to competition law are required to implement it, which Reiche said her ministry had already been working on. "We are examining whether we can implement this regulation even earlier, if necessary through an ongoing legislative process," she said.
The Monopolies Commission backed the model on Tuesday. "This way consumers are protected from abrupt price jumps without undermining competition," said its chairman Tomaso Duso.
The ADAC, however, warned that "mineral oil companies will raise prices more strongly from the outset because increases during the course of the day will no longer be possible," with fuel market expert Christian Laberer cautioning that consumer prices could actually end up higher as a result.
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