As gas prices spike, G7 finance ministers 'stand ready' to support oil supply

OTTAWA — The G7 finance ministers met on Monday to discuss the potential release of emergency oil reserves amid soaring prices due to the Iranian conflict but stopped short of providing that relief.

“We will continue to closely monitor the situation and developments in the energy markets and will meet as needed to exchange information and to coordinate within the G7 and with international partners,” said a statement, following the meeting.

“We stand ready to take necessary measures, including to support global supply of energy such as stockpile release.”

Oil prices have continued to soar as the Iranian conflict has intensified. Monday’s meeting comes as the Strait of Hormuz, a critical maritime oil passage, remains closed due to security concerns as Iranian strikes continue to hit the Gulf region.

Oil production has been reduced in Kuwait, the United Arab Emirates, Iraq and Saudi Arabia.

The price of Brent Crude briefly hit US$120 a barrel on Monday morning, the first time it has been above US$100 since the Russian invasion of Ukraine in 2022, before sinking back below that mark by the end of the day.

Speaking to reporters on Monday, Finance Minister François-Philippe Champagne said the purpose of the meeting was to coordinate an approach to the strategic petroleum reserves and keep trade channels open.

“We had a presentation from the director general of the International Energy Agency, from the International Monetary Fund,” said Champagne. “We’re following the situation very carefully with respect to markets, with respect to supplies, with respect to stock, and also working, obviously, with our American partners.”

Conservative Leader Pierre Poilievre called on Monday for the federal government to enact his party’s “Emergency Energy Production Plan” to expedite the infrastructure and policies needed to boost Canada’s oil and gas exports.

“It will repeal C-69 to rapidly approve permits in six months rather than 18 years,” he told reporters. “It would legalize shipping oil off the northwest coast of B.C.”

While most of those proposals will address challenges to the Canadian oil and gas industry in the long-term, Poilievre also called for the end to the Clean Fuel Standard to help address gas price pressures in the short-term.

In 2022, U.S. President Joe Biden authorized the sale of 180 million barrels of crude oil from the U.S. Strategic Petroleum Reserve (SPR), to reduce global oil prices brought by the Russia-Ukraine War.

“It’s generally been done to really alleviate shortages, but the Americans did use it as a way to soften oil prices as well under the Biden administration,” said Jackie Forrest, managing director of energy research at the ARC Energy Research Institute. “That was really one of the first times it was used as a tool to affect oil prices more than deal with the shortage in the United States at the time.”

Historically, the U.S. has authorized three other emergency drawdowns from its SPR, including in 2011 following the collapse of Muammar Gaddafi’s regime in Libya and in 1991 during Operation Desert Storm. The U.S. SPR currently holds 416 million barrels.

Forrest said 20 per cent of the global oil output and 20 per cent of global liquified natural gas (LNG) output comes from the Gulf region.

While Canadian consumers will be shielded from any outright shortages, due to Canada being a net exporter of oil and gas, they will not be shielded from higher prices, she said.

“When there’s something like the Strait of Hormuz closure, which is causing 20 per cent of oil supplies to not be available, we feel it through price,” she said. “Even if there isn’t a shortage, we’re seeing that in terms of the WTI [West Texas Intermediate] price”

The average price of gas on Monday hit $1.54 per litre, according to CAA National, compared to $1.32 per litre a week ago.

National Post

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