NZ agrees to release oil reserves as part of response to war on Ukraine

Wednesday, 2 March 2022

The voluntary, international move to drawn down oil reserves is designed to constrain price rises and impact one of Russia’s main economic levers.

The Government has agreed to contribute towards the release of 60 million barrels of oil from emergency reserves held overseas as part of an international effort to suppress rising fuel prices in the wake of Russian president Vladimir Putin’s war on Ukraine.

Energy Minister Megan Woods agreed to a contribution during a special meeting of energy ministers from 30 countries held by the International Energy Agency (IEA) overnight.

Woods joined the other energy ministers in condemning the Russian invasion.

Countries are voluntarily releasing reserves for sale, in a move intended to reduce the extent to which Russia can exploit its oil exports and benefit from higher prices.

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While Russia's war on Ukraine is more than 1000 miles away from the UK, it could have wide-ranging effects there.

“In the immediate term, this collective action by IEA countries will ensure there is less volatility in oil prices as a result of the market impact from Russia’s invasion of Ukraine,” Woods said in a statement.

Oil prices have hit an eight-year high of about US$105 (NZ$155) a barrel in the wake of the invasion.

IEA members are normally required to hold stocks equivalent to at least 90 days of net oil imports and New Zealand meets some of that commitment by buying rights to reserves held overseas.

“Russia has used its position as the third-largest crude oil producer in the world and the second-largest oil exporter to weaponise energy, withholding oil and gas supplies to Europe in the months before the invasion contributing to pushing up oil and gas prices,” Woods said.

“This crisis highlights the need to transition away from a reliance on fossil fuels, not only to meet our climate change requirements but also to ensure future world energy security,” she said.

The IEA ministers also encouraged one another to do their “utmost to prioritise Ukraine in oil products supply” and to “reinforce global dialogue with gas producing countries to ensure secure, affordable and reliable gas supplies, including LNG”.

A spokeswoman for Woods said the Government was not considering asking New Zealanders to conserve fuel.

'The clear advice is that there is no supply constraint here at present, so it’s not necessary to conserve fuel and we would not be directly affected if Russian supply is curtailed.'

Woods said last week that Russia’s invasion of Ukraine and any resulting cuts to Russian oil supply would not affect the availability of fuel in New Zealand.

The Maritime Union has said the Government should step into to ‘save’ New Zealand’s two coastal tankers – which are due to be taken out of service in April – to help maintain the country’s resilience to any future supply-chain shocks.

CORRECTION: An earlier version of this story stated that the Government had agreed to release 60 million barrels of oil, whereas that is the total of IEA commitment, to which the Government is contributing. (Amended 11.02pm, March 2, 2022).