The United States will release 50 million barrels of oil from its emergency reserves in coordination with other major energy-consuming countries such as Japan and China to address rising prices, the White House said Tuesday.
Japanese Prime Minister Fumio Kishida said Wednesday morning in Tokyo that his country will release oil in what would be the first tapping of oil reserves in an attempt to lower prices by the resource-poor nation.
"Japan has decided to act in tandem with the United States and sell a portion of the state-owned stockpiles in a manner that does not violate the oil stockpiling law," which limits release to such purposes as response to disasters and political turmoil overseas, said Kishida.
"The stability of crude oil prices is a very important issue in realizing economic recovery from the coronavirus pandemic," he added. So as not to violate the law, Tokyo plans to release reserves in excess of its target of storing oil worth 160 days of consumption.
Despite the decision by the countries, oil prices continued to rise in New York overnight and in Tokyo amid doubts about the effectiveness of the move as the amount of oil they are to release is only worth several days of consumption.
In New York on Tuesday, the benchmark West Texas Intermediate crude for January delivery rose $1.75 from Monday to $78.50 per barrel.
At the Tokyo Commodity Exchange on Wednesday, Middle East crude oil futures sharply rebounded, with its benchmark briefly rising by 3,280 yen per kiloliter to 55,240 yen, its highest level in roughly two weeks.
The U.S. announcement followed weeks of consultations with countries around the world, the White House said, as surging prices of gasoline and other fuel products have hit households and companies already struggling with the impact of the coronavirus pandemic.
India, South Korea and Britain are also among the countries taking action.
"This is the first time we have done something like this in parallel with other major energy-consuming nations," said a senior official of the U.S. administration of President Joe Biden.
The increase in gas prices has occurred partly because global oil supply has not kept pace with global oil demand as economies have recovered from the coronavirus pandemic while countries and companies hold back on supplying oil, another official explained.
Of the 50 million barrels of oil the United States will make available from its Strategic Petroleum Reserve, 32 million barrels will be loaned to oil companies and 18 million barrels will be provided through a sale of oil that Congress had previously authorized.
The Strategic Petroleum Reserve is the world's largest supply of emergency crude oil with more than 600 million barrels of oil, according to the U.S. government.
"The president stands ready to take additional action, if needed, and is prepared to use his full authorities working in coordination with the rest of the world to maintain adequate supply as we exit the pandemic," the White House said.
As for Japan, the amount of oil to be initially released is expected to be equivalent to several days of consumption, according to a government official.
In Japan, past decisions to tap reserves were made to address supply concerns following natural disasters and overseas political turmoil. So far, the country has implemented releases five times, including in the wake of the Gulf War in the early 1990s and the March 2011 earthquake and tsunami in northeastern Japan.
While the Japanese government has been hesitant to tap into its stockpiles as it could deplete reserves kept for natural disasters, a senior industry ministry official said earlier it was "not an option" to refuse the U.S. request.
Japan, which relies on oil-producing countries in the Middle East for around 90 percent of its consumption, started keeping crude oil reserves in the 1970s.
Japan has three different types of oil stocks -- state-owned, reserves held by companies and those jointly stored domestically with oil-producing countries.
As a member of the International Energy Agency, the Japanese government is obliged to maintain oil reserves equal to 90 days of net imports in the previous year, while the quantity of private emergency stocks should be more than 70 days of its oil consumption in the previous year, according to Japanese law.
As of the end of September, Japan had reserves for 242 days of domestic consumption, of which 145 days' worth were state-owned and 90 days held by the private sector, with the remaining volume jointly stored with oil-producing countries, according to the latest government data released this month.