The US and 30 other countries around the world committed to release 60 million barrels of oil from the strategic reserve on Tuesday in a bid to stabilize global energy markets after the Russian invasion of Ukraine.
The members of the International Energy Agency (IEA) united their efforts in response to the invasion after instability caused by the incursion and its many ramifications, including the scuttling of the Nord Stream 2 pipeline between Russia and Germany.
Issuing a statement after the unprecedented decision, a US officials stated that America would release one half of that entire amount from its own reserves.
Strategic reserve tapped in unusual move as a result of Russian invasion
The significant market and supply disruptions that were feared to come about as a result of the invasion may be thwarted by the move to release oil and gas from the gigantic strategic reserve.
As of midday on Wednesday, the price of oil had risen to $112.00 per barrel; this represents the highest price since 2011 as Russian crude is now considered “untouchable,” according to oilprices.com.
U.S. Secretary of Energy Jennifer M. Granholm released a statement on Tuesday detailing the release following an emergency meeting of the IEA member countries in response to Russia’s invasion.
“Today, I chaired an emergency ministerial meeting of the International Energy Agency (IEA) – founded 50 years ago by the U.S. and other allies – where the United States and 30 other member countries, supported by the European Commission, agreed to collectively release an initial 60 million barrels of oil from strategic petroleum reserves,” Granholm announced.
“This decision reflects our common commitment to address significant market and supply disruptions related to President Putin’s war on Ukraine.
Authorities “stand ready to take additional measures if conditions warrant”
“In line with this decision, President Biden authorized me to make an initial commitment on behalf of the United States of 30 million barrels of oil to be released from the Strategic Petroleum Reserve. We stand prepared to take additional measures if conditions warrant,” she added.
On Monday, Reuters reported that the Swiss-based company that built the Nord Stream 2 pipeline that was supposed to have carried natural gas from Russia to Germany is considering filing for insolvency as it tries to settle claims before a U.S. sanction deadline calling for other entities to cease their dealings with it.
The U.S. Treasury Department’s Office of Foreign Assets Control issued an executive order back on February 23 calling for “the wind down of transactions involving Nord Stream 2 AG” or “any entity in which Nord Stream 2 AG owns, directly or indirectly, a 50 percent or greater interest” by today, March 2.
Gazprom was responsible for paying half the cost of constructing the $11 billion pipeline, with the rest of it financed by the British oil and gas major Shell, Austria’s OMV, France’s Engie and Germany’s Uniper and Wintershall DEA.
Germany announced that it would stop the certification process for the pipeline on February 22 after the Russian invasion of the easternmost part of Ukraine.
Nord Stream 2 AG is registered in Switzerland although it is owned by the Russian state-owned gas giant Gazprom. Its enormous pipeline was completed last year but was awaiting certification from Germany before gas actually started coursing through it.
The enormous project would have doubled the amount of gas flowing from Russia to Germany, which already gets half its gas from Russia.
The two sources, who spoke on condition of anonymity to Reuters because the talks about insolvency are confidential, told reporters that Nord Stream 2 AG has been working with a financial adviser on taking care of some of its liabilities; it may begin formal insolvency proceedings in a Swiss court as early as this week.
Energy diversification needed in Europe
The US Energy Department’s statement noted “We will continue advancing ongoing efforts to accelerate Europe’s diversification of energy supplies away from Russia and to secure the world from Putin’s attempts to weaponize energy supplies.
“The United States believes that investing in clean energy is the best way to reduce domestic and international dependence on Russian oil and gas. Clean energy technologies are available and cost-effective today and offer the surest path towards a world where energy supply cannot be used as a means of political coercion or a threat to national security, and where families and businesses are protected from volatile prices and markets.
“Accordingly, we continue to support ambitious international clean energy goals and near-term action, including strong domestic climate action, and the pursuit of a net-zero emissions economy by 2050.”