IEA to carry out largest ever oil stock release amid market disruptions

• The 32 member countries of the International Energy Agency (IEA)  unanimously agreed to make 400 million barrels of oil from their emergency reserves available to the market to address disruptions in oil markets stemming from the war in the Middle East.

• The conflict in the Middle East that began on February 28 has impeded oil flows through the Strait of Hormuz, with export volumes of crude and refined products currently at less than 10 per cent of pre-conflict levels. 

• This is forcing operators across the region to shut in or curtail a substantial amount of production.

• IEA members hold emergency stockpiles of over 1.2 billion barrels, with a further 600 million barrels of industry stocks held under government obligation. 

• The emergency stocks will be made available to the market over a timeframe that is appropriate to the national circumstances of each member country and will be supplemented by additional emergency measures by some countries.

Has the IEA done this before?

The coordinated stock release is the sixth in the history of the IEA. 

i) In the build up to the Gulf War in 1991.

ii) After hurricanes Katrina and Rita damaged offshore oil rigs, pipelines and oil refineries in the Gulf of Mexico in 2005.

iii) In response to the prolonged disruption of oil supply caused by the Libyan Civil War in 2011.

iv) Twice during the energy crisis in 2022 following Russia’s invasion of Ukraine. 

v) The sixth and largest collective action was announced on March 11 in response to the disruptions stemming from the conflict in the Middle East.

What is the role of International Energy Agency? 

• The International Energy Agency (IEA) was established in 1974 within the framework of the Organisation for Economic Cooperation and Development (OECD) to implement an international energy programme. 

• The IEA was born due to the 1973-1974 oil crisis, when industrialised countries found they were not adequately equipped to deal with the oil embargo imposed by major producers that pushed prices to historically high levels. 

• This first oil shock led to the creation of the IEA in November 1974 with a broad mandate on energy security and energy policy cooperation. This included setting up a collective action mechanism to respond effectively to potential disruptions in oil supply.

• As a result, countries seeking to become members of the IEA must also be members of the OECD and hold 90 days of oil imports as commercial stocks. 

• But over the years, the IEA’s mission has expanded substantially and today the agency is working with major economies around the world to enhance energy security and to help accelerate their clean energy transitions.

• The IEA’s collective emergency response system mechanism ensures a stabilising influence on markets and the global economy.

• Today, IEA, with its headquarters in Paris, is at the center of the global energy debate, focusing on a wide variety of issues, ranging from electricity security to investments, climate change and air pollution, energy access and efficiency, and much more.

• The basic aim of the IEA is to foster cooperation among its member countries and to increase energy security through energy conservation, development of alternative energy sources and energy research, development and demonstration. 

• The IEA is made up of 32 member countries. 

They are: 

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Latvia

Lithuania

Luxembourg

Mexico

New Zealand

Norway

Poland

Portugal

Slovak Republic

South Korea

Spain

Sweden

Switzerland

The Netherlands

Turkey

United Kingdom

United States

• Five countries are seeking accession to full membership — Brazil, Chile, Colombia, Costa Rica and Israel.

• In addition, the IEA family also includes 13 association countries. 

• India joined the IEA as an association country in 2017.

How India responded to IEA’s decision?

• India welcomed the IEA’s decision to release emergency oil stocks amid the prevailing supply disruptions.

• The government of India is closely monitoring the evolving situation in global energy markets, particularly in the Middle East.

• India stands ready to take appropriate measures, as necessary, to support global market stability in alignment with the efforts of the IEA.

IEA starts membership talks with India

• India, which joined the IEA Family as an Association country in 2017, sent a formal request for full membership to IEA ministers in October 2023.

• Ministers from the IEA’s member countries have agreed to start discussions with India on the government’s request to become a full IEA member, recognising the country’s strategic importance in tackling global energy and climate challenges.

• India becoming an IEA member would mark a huge, consequential change in international energy governance.

• The IEA and India have expanded their collaboration on energy and climate issues in recent years – further deepening ties during India’s G20 Presidency in 2023. 

• The IEA provided expert analysis and advice on energy, climate and development issues throughout India’s G20 Presidency, including on renewables, biofuels, energy efficiency, innovation and India’s Lifestyle for Environment (LiFE) initiative.