The Group of Seven (G7) wealthy nations announced Friday that they will release about 100 million barrels of oil and refined petroleum products in the coming weeks. A major portion of the initial release will consist of diesel, following a sharp rise in fuel prices in the United States.
U.S. President Donald Trump said the diesel supplies would be released “immediately.” The G7 has pledged to begin with a large, accelerated release of diesel within 20 days, with the remaining supplies to be distributed over the following four months.
The move comes as Trump and Republicans face growing pressure over rising energy costs ahead of the Nov. 3 midterm elections. Trump announced the decision on social media Friday. An AP-NORC poll showed that public approval of his handling of the economy had fallen to its lowest level, as the war involving Iran and ongoing trade disputes have contributed to higher prices for oil and other goods.
Fuel costs in the United States and other countries have climbed sharply during the eight-month war. Trump has repeatedly argued that the economic costs are justified by efforts to prevent Iran from developing nuclear weapons. According to AAA, the average U.S. diesel price stood at $6.37 per gallon Friday, following a record $6.52 on Sept. 22. Diesel prices have also reached record levels in parts of Europe.
Michael Lynch, a distinguished fellow at the Energy Policy Research Foundation, said releasing diesel reserves in Europe could reduce the amount of U.S. diesel being exported. He estimated that this could eventually bring U.S. diesel prices down by roughly 25 to 50 cents per gallon.
Macron says the move could reduce fuel costs
France currently holds the rotating presidency of the G7 and announced the agreement following a video meeting chaired by French President Emmanuel Macron. The G7 consists of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, with the European Union also represented.
The latest decision follows a March agreement under which members of the International Energy Agency planned to release 426 million barrels of oil and petroleum products in an effort to stabilize global markets. European Union countries had committed around 92 million barrels, with a significant share consisting of refined products such as diesel.
Macron said the coordinated action demonstrated unity among the countries involved and should help ease fuel prices. He also said the additional supply would increase liquidity in the market.
Several factors have contributed to the rise in diesel prices. Along with higher crude oil costs, Russia has restricted fuel exports following Ukrainian drone attacks on its refineries. Although European countries do not purchase Russian diesel directly, countries such as Turkey and those in Latin America that previously bought Russian supplies are now competing with Europe for alternative sources.
Supplies of refined petroleum products from Persian Gulf producers have also declined because of war-related damage and disruptions to export routes.
Following the G7 announcement, U.S. oil prices fell about 2%. However, analyst Pavel Molchanov of Raymond James said the market response was limited because it remained unclear whether the 100 million barrels represented an additional release or the completion of an earlier commitment made in March.
G7 rejects restrictions on energy exports
Some Republicans in the United States had urged Trump to restrict diesel exports in an attempt to reduce domestic fuel prices. However, the G7 agreement specifically states that members will not impose restrictions on energy exports to one another.
Energy analysts have warned that restricting U.S. diesel exports could initially reduce domestic prices but could create problems later. Because refineries produce diesel alongside other petroleum products, reducing diesel production could also reduce supplies of gasoline and other fuels.
Trump said Friday that the United States had no plans to impose such an export ban.
“We’re not going to be doing the export ban,” Trump told reporters at the White House, adding that both Europe and the United States were contributing significantly to the effort.
Analysts warn of possible long-term consequences
Some energy experts caution that releasing emergency reserves may provide temporary relief while creating longer-term risks.
Jim Krane, an energy research fellow at Rice University's Baker Institute, said using strategic reserves could reduce fuel prices for a limited period but would leave Europe with smaller emergency supplies. Those reserves would eventually have to be replenished, ideally when prices are lower, although it is uncertain when that opportunity will arise.
Krane also noted that the current environment, with two wars affecting refineries and international fuel shipments, makes it particularly risky to reduce emergency stockpiles when future prices and potential peace agreements remain uncertain.
According to the French Embassy in the United States, Trump spoke with Macron overnight about rising fuel prices and the availability of petroleum products. Macron later chaired the G7 video conference on the issue.
A White House official, speaking anonymously because they were not authorized to comment publicly, said Trump also joined the G7 meeting to discuss the release of European diesel reserves.
Meanwhile, Trump began what he described Thursday as a 32-day series of political rallies aimed at supporting Republican candidates in the November elections. The president has increasingly expressed frustration that voters do not sufficiently recognize what he considers his administration's achievements. Earlier this week, Trump gave his economic performance an A-plus but acknowledged that his administration was doing “an extremely poor job of promotion.”
