Oil shortage crisis, impacting Asia?

Question AI · Why is the largest release of reserves in history unable to suppress soaring oil prices?

On March 11, the International Energy Agency (IEA) announced that 32 member countries unanimously agreed to release 400 million barrels of oil from their emergency reserves into the market.

“Unprecedented scale.” IEA Executive Director Fatih Birol described the challenge facing the oil market and this reserve release action.

Releasing 400 million barrels of oil reserves at once is the largest reserve release since the IEA was established in 1974, and it is also the sixth coordinated reserve release by the IEA. The previous five occurred in 1991, 2005, 2011, and twice in 2022. In 2022, to counter the impact of the Russia-Ukraine conflict, the IEA coordinated two reserve releases within a month totaling 183 million barrels, which was considered the largest artificial intervention in oil supply at the time.

IEA reserve releases are often seen as measures to soothe market sentiment or respond to energy crises. However, after this unprecedented release was announced, oil prices did not fall back but continued to rise. The market remains anxious, and some Asian countries have already begun restricting energy consumption, indicating signs of an energy crisis.

AI Illustration/adan

Unprecedented Scale of Reserve Release

Before the IEA coordinated the release, Japan had already announced a unilateral release of reserves, but the coordinated release by the IEA carries more signaling significance. Birol said, “The oil market is global, so a coordinated global response is needed to address major supply disruptions.”

Regarding the difference between the two, Chen Shouhai, Professor at China University of Petroleum (Beijing) School of Economics and Management and Director of the Oil and Gas Policy and Legal Research Center, explained that China’s strategic reserve mechanism differs from the coordinated actions of IEA member countries, being more based on domestic circumstances and independent decision-making.

Although this release is more than twice the scale of 2022, international oil prices briefly fell and then rose again. On March 12, during trading, Brent crude futures for May delivery quickly returned above $100 per barrel and remained high. Chen Shouhai told China News Weekly that the actual market calming effect of this release was far less than the two rounds of reserve releases after the Russia-Ukraine conflict in 2022.

After March 30, 2022, when the US and IEA announced successive releases of oil reserves, Brent and WTI futures prices fell by more than $10 per barrel within a week, dropping back to around $100.

Chen Shouhai believes that after the Russia-Ukraine conflict in 2022, sanctions by Europe and the US on Russian oil only affected trade flows; Russian oil production facilities were not destroyed, and there was no effective export blockade. Countries like India increased their purchases of Russian oil and reduced imports from the Middle East, creating a trade rebalancing, so overall supply remained stable. This volatility was within the scope of reserve adjustments, making the reserve release more effective. However, the blockade of the Strait of Hormuz caused a significant and direct reduction in international oil supply, with a more immediate impact.

According to the IEA report released on March 12, before the conflict, about 20 million barrels of crude oil and refined products passed daily through the Strait of Hormuz; now, the volume is minimal. The IEA attributes this to the largest-ever disruption of oil supply.

Yang Hanfeng, a senior energy strategy expert and former head of the China National Petroleum International Department Liaison Office, told China News Weekly that even if the 400 million barrels are fully released, it only accounts for about 20 days of global consumption. Based on logistics capacity, the actual daily release rate is only 1.2 to 4 million barrels, which can only cover about one-fifth to one-quarter of the actual shortfall.

Homayoun Falakshahi, head of crude oil analysis at data analytics firm Kpler, believes that the key is the speed of reserve release. Slow releases are unlikely to impact the market significantly. Once the war exceeds 45 to 50 days, releasing 400 million barrels will be insufficient.

On March 15, the IEA disclosed more details about the reserve release. Member countries have submitted their individual plans; Asia-Pacific countries will release reserves immediately, while the Americas and Europe will start from late March.

Located in Fukuoka Prefecture, Japan, the National Petroleum Reserve. Photo/IC

The US and Japan are the main sources of the reserve releases. Previously, US Energy Secretary Jennifer Granholm announced that the US would release 172 million barrels of oil, expected to take about 120 days. Rough estimates suggest the US releases about 1.43 million barrels per day.

Although the IEA states that global observable crude and refined product inventories exceed 8.2 billion barrels—highest since February 2021—this unprecedented reserve release can only serve as a buffer. Restoring Strait of Hormuz navigation depends on insurance and navigation safety.

“Although the data looks optimistic on paper, in practice, the speed of reserve release is severely lagging. For example, the US takes 13 days to tender, and the earliest market entry is at the end of March. Shortages of refined products like diesel and jet fuel could be faster and more critical than crude shortages. If refineries halt due to raw material disruptions, even large reserves won’t help,” Yang Hanfeng said. He added that the reserve release is more about buying time for the Strait of Hormuz to reopen than directly suppressing oil prices. Once the war exceeds 45 days, the world faces the threat of permanent capacity loss, and reserves will lose their significance.

Greater Impact on Asia

“After increasing imports from non-Gulf regions and appropriately releasing reserves, the next step is to prepare for restrictions or even partial consumption cuts. Supply disruptions will inevitably impact consumption, so minimizing costs is the goal,” said Guo Haitao, Associate Professor at China University of Petroleum (Beijing).

Restrictions on consumption and price controls are already being considered by some countries as policy options, with many having relevant tools. Chen Shouhai noted that China has mature oil price regulation experience; during the 2007 oil crisis, China implemented a ‘price ceiling’ policy, capping domestic retail prices if international prices exceeded $130 per barrel.

On the same day the IEA announced the reserve release, Germany’s Federal Minister for Economic Affairs and Energy, Katrin Göring-Eckardt, said the government plans to limit fuel price increases to once per day at gas stations and to conduct stricter anti-monopoly reviews, though no timeline was given. Some Asian countries have already taken action. Vietnam announced a temporary suspension of fuel import tariffs to ensure domestic supply, which will last until the end of April.

The urgency of releasing oil reserves shows that, compared to Europe and the US, Asian countries are more affected, due to their heavier reliance on Middle Eastern oil and gas.

IEA data shows that by 2025, 80% of crude oil and refined products passing through the Strait of Hormuz are destined for Asia, including 4.6 million barrels to China, 2.1 million to India, and 6.2 million to other Asian countries. In contrast, only 600,000 barrels go to Europe and 500,000 to the Americas.

While alternative sources or routes for oil exist, the impact on natural gas supply is more severe. The IEA states that last year, over 110 billion cubic meters of LNG were transported via the Strait of Hormuz, nearly one-fifth of global LNG trade. Ninety percent of this LNG is shipped to Asia, with only 10% to Europe. The IEA notes: “There are currently no alternative routes to deliver this volume to the market.”

Since the war began, spot LNG prices in Northeast Asia (JKM) have surged from about $12 per million British thermal units (MMBtu) to a peak of $25.40/MMBtu, an increase of over 100%. European TTF prices also soared to €51.94 per megawatt-hour (about $16.74/MMBtu), with a single-day increase exceeding 50%.

Yang Hanfeng believes that since about 85% of Qatar’s LNG supplies go to Asia, the blockade of the Strait of Hormuz forces Asian buyers to turn to the US and West Africa for spot purchases. Data shows at least eight LNG ships originally headed for Europe have diverted to Asia, making it difficult for Europe to replenish inventories and causing prices to rise. As long as shipping through the Strait of Hormuz is blocked, Asian buyers must pay higher “risk premiums” to secure supplies, while Europe remains relatively calm, limiting price increases.

“LNG supply is highly concentrated; Qatar, Australia, and the US together account for nearly 80% of global LNG trade, with Qatar alone about 20%. Although the US and Australia are major alternatives, their LNG facilities have long construction cycles and limited short-term capacity increases. There are no quick-start backup LNG capacities globally, so demand countries in Asia and Europe are competing for limited spot supplies,” Chen Shouhai said. He added that natural gas trade is mainly through long-term contracts, with spot trading accounting for a small share, and storage conditions are harsh and costly. The global reserves are small and mainly used for short-term regional peak shaving, not for long-term cross-regional supply disruptions.

Different Asian countries’ reliance on LNG imports, their ability to compete for high-priced spot gas, and their energy consumption structures determine the extent of impact.

If we imagine a coordinate system, with the vertical axis representing the proportion of LNG imports in total natural gas demand, and the horizontal axis representing the share of natural gas in total power generation, countries like Thailand and Bangladesh, with about 30% reliance on LNG imports, are less dependent than Japan and South Korea, which nearly rely 100%. However, their dependence on natural gas for power exceeds 60%. This means that a reduction in LNG imports would directly impact their power systems.

On March 9, Bangladesh announced the closure of all universities ahead of the Ramadan holiday, citing high electricity consumption in dormitories, labs, and classrooms as the reason. The government has allocated limited natural gas to power plants, forcing some factories to shut down.

Natural gas accounts for over half of Bangladesh’s energy consumption and is a key power fuel. Of Bangladesh’s LNG imports in 2025, nearly 75% will come from Qatar, which relies over 93% on the Strait of Hormuz for exports.

Pakistan’s dependence on LNG imports is similar. On March 9, Pakistan announced measures to reduce energy consumption, including closing schools, reducing fuel subsidies, and implementing a four-day workweek in the public sector.

On March 8, in Dhaka, Bangladesh, large queues of vehicles waiting to refuel. Photo/Visual China

These energy restriction measures evoke scenes from the 1970s energy crises, with cars queuing for fuel—are energy crises returning?

“History’s biggest crisis,” as Saudi Aramco CEO Amin Nasser described the Middle East oil and gas industry, but current oil prices are actually below the $139 per barrel peak after the 2022 Russia-Ukraine conflict, and far below the record $147.50 in 2008.

Bloomberg energy and commodities columnist Javier Blas said it’s too early to declare an energy crisis. The three key factors are affected commodities, price increases, and duration. He believes the current energy market has not reached the pain levels of 2021–2022, when Europe was in a true crisis, let alone the 1973–1974 or 1979 crises.

He notes that over the past 50 years, the energy market has undergone dramatic changes. During the 1973–1974 crisis, oil was the only major energy source, even for power generation. Today, oil accounts for only about 3% of global electricity generation, down from nearly 25%.

Another change is on the supply side: after the shale revolution, the US has become the world’s largest oil producer, with a projected daily output of 13.6 million barrels in 2025. Blas believes this gives the US more influence over pricing.

However, even if the US achieves energy self-sufficiency, global oil prices are still affected by international markets. On March 11, the American Automobile Association reported that the average US gasoline price rose 22% month-over-month to $3.58 per gallon, the highest in over 21 months.

Yang Hanfeng believes that the current international oil prices have not reached the highs of 2008 and 2022 not because geopolitical risks are lower, but because the global oil market has shifted from “tight supply” to “oversupply.” Historically, oil crises like 1973 and 1979 involved significant and long-term reductions in global supply.

“The trigger for modern oil crises has shifted: from physical shortages to price shocks and financial panic. Simply put, the threshold for an oil crisis has lowered; it no longer requires a complete lack of oil, just a sharp price surge can trigger a crisis,” Yang Hanfeng said.

Reshaping the International Energy Market?

Markets are eager to find energy sources outside the Middle East. Thailand’s Energy Minister Oodpong Riewpreecha previously said the government plans to buy crude oil from West Africa and the US, and accelerate diversification to reduce dependence on the Middle East.

For countries relying on oil and gas imports, diversification has always been key to energy security. But after the Russia-Ukraine conflict in 2022 and sanctions by the US and Europe on Russian oil and gas, options have decreased. Europe, for example, has been steadily reducing reliance on Russian energy. By 2025, Russia remains the third-largest oil producer, with a daily output of 9.11 million barrels.

Japan’s Ministry of Economy, Trade and Industry released data in February showing that nearly 96% of Japan’s imported crude oil comes from the Middle East, the highest since records began. During the 1970s oil crises, Japan’s dependence on Middle Eastern oil was between 70% and 80%. Japan has long sought diversification to spread risks, but after the Russia-Ukraine conflict, it has become even more reliant on Gulf countries. Similarly, South Korea also imports about 70% of its oil from the Middle East.

An industry veteran told China News Weekly that Japan and South Korea had considered building pipelines from Russia to their countries over 30 years ago. But due to geopolitical changes and LNG technology development, they now focus more on maritime transportation to meet natural gas needs.

The US is easing sanctions on Russian oil. On March 5, US Treasury Secretary Janet Yellen announced a 30-day temporary exemption allowing Indian refineries to purchase Russian oil and petroleum products, involving only oil already at sea. As of March 4, about 120 million barrels of Russian oil are afloat globally.

In February, the US and India also reached an agreement: the US will reduce tariffs on Indian imports from 50% to 18%, and India will stop buying Russian oil and instead purchase US oil. On the evening of March 6, Yellen further said the US is considering relaxing other sanctions on Russian oil.

Apart from Russian oil, the US has not blocked Iranian exports. Yellen said on March 16 that the US is allowing Iran to continue transporting oil through the Strait of Hormuz. “Iranian ships are exporting oil, and we permit this to supply other regions of the world.”

Releasing previously sanctioned “gray” supplies of oil has become a necessary choice, but it is difficult to reverse the restructuring of the international energy market caused by the Russia-Ukraine conflict.

Chen Shouhai believes that after the 2022 Russia-Ukraine conflict, US and European sanctions on Russian oil triggered a substantial restructuring of global oil trade patterns. However, the impact of this war on the international oil and gas market differs fundamentally from the Russia-Ukraine conflict; its effects are mainly short-term and will not alter existing trade patterns. The central role of Middle Eastern oil and gas in the global supply chain will not be fundamentally shaken by this short-term conflict, but long-term influence will gradually weaken with the global energy transition.

“The market volatility caused by this war is consistent with past oil crises. High oil prices and supply security risks will further accelerate energy transition, increasing the share of clean and renewable energy, optimizing energy consumption structures, and reducing reliance on traditional oil and gas. Meanwhile, countries will continue to diversify import sources to mitigate geopolitical risks,” Chen Shouhai said.

Published in China News Weekly, Issue 1228, March 23, 2026

Title: The Energy Defense War Behind the 400 Million Barrel Oil Release

Reporter: Chen Weishan

(chenweishan@chinanews.com.cn)

Editor: Min Jie