G7 nations agree to release 100 million barrels of oil and diesel

G7 oil release to combat energy squeeze

G7 nations have agreed to release 100 million barrels of oil and diesel from their strategic stockpiles, a coordinated effort to drive down record fuel prices that have hammered consumers on both sides of the Atlantic.

The emergency intervention, which will be coordinated by the International Energy Agency (IEA), begins immediately. G7 members and partners will distribute the supplies over the next four months, starting with a heavily front-loaded release of diesel within the first 20 days.

Trump pressures allies ahead of elections

The announcement follows intense pressure from US President Donald Trump, who faces lagging approval ratings and mounting voter frustration over inflation ahead of November's midterm elections.

Trump announced the breakthrough on social media on Friday, stating that Europe had agreed to unlock a 'massive amount' of its heavily stocked diesel reserves. The agreement was finalised after an overnight phone call between Trump and French President Emmanuel Macron, who currently holds the G7's rotating presidency and chaired an emergency video conference of the group's leaders on Friday.

Diesel prices have hit unprecedented highs in recent weeks. In the US, a gallon of diesel averaged $6.37 on Friday, just off the record peak of $6.52 reached on 22 September. European drivers are facing a similar squeeze, which has been exacerbated by severe geopolitical disruptions.

Geopolitical supply shocks persist

Global energy markets are struggling under the weight of two active conflicts. Russia recently banned diesel exports following a wave of Ukrainian drone strikes on its refineries. At the same time, shipments from Persian Gulf producers have plummeted due to war damage and transit bottlenecks in the Strait of Hormuz, a critical chokepoint that handles a fifth of the world's energy supply.

While Europe does not import Russian diesel directly, it is now competing with buyers from Turkey and Latin America for alternative supplies, keeping global prices elevated.

Analysts warn of reserve depletion risks

The market's initial reaction was relatively modest, with US oil prices dipping by 2%. Analysts attributed the muted response to a lack of clarity in the G7's announcement.

Pavel Molchanov, an investment strategy analyst at Raymond James, said it remains unclear whether this 100 million barrels is an entirely new release or simply the final portion of a 426-million-barrel release pledged by IEA members in March.

There are also long-term risks to tapping emergency stockpiles. Jim Krane, an energy research fellow at Rice University's Baker Institute, warned that draining reserves is a gamble while global supply lines remain highly volatile.

'Draining stocks will reduce retail fuel prices for a while, at the cost of leaving Europe with less emergency cover,' Krane said. He added that G7 nations will eventually have to rebuild their strategic reserves, likely at highly uncertain future prices.

However, some market experts believe the release will bring short-term relief. Michael Lynch, a fellow at the Energy Policy Research Foundation, estimated that releasing European diesel could reduce US diesel exports, potentially lowering retail prices in the US by 25 to 50 cents a gallon within a few weeks.