Will oil reserves save the global economy?
Author: Spydell_finance
Will strategic oil reserves save the world from an energy crisis?
No, they will not.
On March 11, the International Energy Agency (IEA) decided on a coordinated release of 400 million barrels of oil from the strategic/emergency reserves of its member countries—an intervention that represents the largest in the history of the oil market.
Without the broader context, it is impossible to understand the scale of the problem. The supply gap will amount to about 15–16 million barrels per day (bpd), since up to 3 million bpd can be redirected overland through pipeline routes in Saudi Arabia and the UAE, and another 1–2 million bpd will likely pass through the strait primarily in China’s interests, along with some “suicidal” operators willing to take the risk at their own peril.
Therefore, the outgoing flow of roughly 20 million bpd of crude oil and petroleum products (about 20% of global supply/demand) will likely adjust down to about 15–16 million bpd in the coming weeks, which would be a more realistic estimate. That amounts to more than 450 million barrels per month.
Considering that during the first 12 days of the conflict an accumulated gap of about 200 million barrels had already formed—while policymakers were still debating the decision about the “unprecedented” 400-million-barrel intervention—half of that gap has effectively already been absorbed.
The remaining 200 million barrels would stabilize the market for only a couple more weeks, until the end of March. Therefore, by the beginning of April, the question will arise: where will another 400–450 million barrels for April come from? And then another 450 million for May? And what comes next?
There is no solution except either halting the war in the Middle East or carrying out a military operation to break the blockade of the Strait of Hormuz. But even that task cannot be effective without a ground operation, and a ground operation is ruled out under the current circumstances.
Many people focus on the Strait of Hormuz, forgetting that Iran has about 1,700 km of coastline, from every kilometer of which a potential threat could emerge.
The Strait of Hormuz merely narrows the attack corridor to about 50–60 km. However, there is also the entrance to the strait and the exit from it, both of which pose risks to shipping. In addition, there are loading terminals in Middle Eastern countries located roughly 150–250 km from Iran’s coastline—a distance that is practically nothing for modern strike drones.
Name at least one reason why Iran would not be able to target loading ports in Saudi Arabia, Iraq, Kuwait, Qatar, Bahrain, Oman, and the UAE.
One should not fixate solely on the Strait of Hormuz. The entire Persian Gulf has ceased to be a safe place, where targets could include ports, terminals, oil and gas storage facilities, LNG plants, and extraction and transportation infrastructure.
All of these are large, stationary targets—meaning they are easily accessible for drones and missiles. Even if 9 out of 10 drones are intercepted, the tenth could disable critical energy infrastructure for months or even years.
Suppose that somehow (it is unclear how, but let us assume) the U.S. Air Force and Navy manage to take control of the Strait of Hormuz itself. That still would not eliminate the threat to the region; it might even increase it.
While missiles and launch systems in Iran may indeed face certain constraints, drones can be produced and launched under improvised, workshop-level conditions. Moreover, they could be supplied continuously via the Caspian Sea from Russia or through Pakistan along a kind of “eastern Chinese express.”
The density of energy infrastructure in the Middle East is so high, and the distances so short (within roughly 150–350 km), that persistent threats from Iran could be highly effective, potentially altering the strategic profile of the conflict.
This is precisely why releasing 400 million barrels solves nothing. It only works within the assumption that everything will be over by the end of March. But I doubt that Trump will suddenly wake up and say:
“Great fighting, a wonderful 2–3 week excursion into Iran. We killed everyone and destroyed everything. All the objectives of the special Iranian operation have been achieved. Thanks everyone—you’re free to go. Thank you for your attention to this matter. — DJT.”
Iran will not allow an easy exit, knowing Trump’s weak points and the limited operational window, where every additional week plays strongly against him.
Yes, Trump has wanted to post such a tweet from the very first days. But so far the result has been that the older Khamenei has been replaced by a younger Khamenei, and Iran has become far angrier—even if its military-industrial complex has been damaged. Yet that does not remove the threat to the Persian Gulf.