The International Energy Agency has proposed the largest release of oil reserves in its history to offset supply disruptions stemming from the war in Iran, the news agency Reuters reported citing Wall Street Journal on Tuesday. The IEA's proposed drawdown would exceed the 182 million barrels of oil that IEA member countries put onto the market in two releases in 2022 when Russia launched its full-scale invasion of Ukraine, the WSJ said, citing officials familiar with the matter.

Although IAE has not reacted to the WSJ report, the Asian oil market desperately need this move amid the soaring prices of crude oil following the blockade of the world’s energy lifeline- the Strait of Hormuz, in response to Israel and the US bombing of Tehran.

What is IEA?

The International Energy Agency (IEA) is a Paris-based, autonomous intergovernmental organisation established in 1974, primarily aimed at ensuring reliable, affordable, and clean energy for its 31 member countries and the world. India is also a member of the IEA. It monitors and analyses energy trends to help governments make informed decisions on energy policy and security.

How does IEA work?

According to the mechanism updated on its website, each IEA country has an obligation to hold oil stocks equivalent to at least 90 days of net oil imports. Member countries have substantial flexibility in how they meet the stockholding obligation. In case of a severe oil supply disruption, IEA members may decide to release these stocks to the market as part of a collective action.

IEA emergency response system

The Agency’s collective response system is designed to mitigate the negative economic impacts of sudden oil supply shortages by providing additional oil to the global market. However, the emergency response system is not a tool for price intervention or long-term supply management.

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When has IEA collective action taken place previously?

Since the creation of the IEA, there have been five collective actions: in the build up to the Gulf War in 1991; after Hurricanes Katrina and Rita damaged offshore oil rigs, pipelines and oil refineries in the Gulf of Mexico in 2005; in response to the prolonged disruption of oil supply caused by the Libyan Civil War in 2011, and two during the Ukraine-crisis, the first in March 2022 and the second in April 2022. The contribution of each of these collective actions in helping the oil market adjust was evident at the time, according to the IEA.

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Will India join the IEA in releasing oil reserves?

India has no plans to join the IEA ‌initiative to release strategic oil reserves, a government source told Reuters on Monday, as global oil prices surged amid supply fears due to the Iran conflict. Oil prices surged above USD 119 a barrel on Monday, their highest since mid-2022, after some major producers cut supplies and fears of prolonged shipping disruptions. However, after the release of WSJ reports, the oil stock market has responded positively.

"The crisis (that led to a rise in prices) is not our creation. Those responsible have to deal with it and create situations to ease (prices)," a source told the PTI.

(With inputs from agency)