G7 nations will release 100 million barrels of oil and diesel fuel after prices soar

France, which holds the rotating presidency of the G7, made the announcement in a statement released after videoconference talks chaired by President Emmanuel Macron.

The G7 countries are Canada, France, Germany, Italy, Japan, the U.K., and the U.S., plus EU representation.

Macron said the common decision and unity should bring down prices and that the volumes released would add liquidity to the market.

Record Diesel Prices Drive the Decision

The decision follows a period of surging fuel costs in the U.S. and abroad, driven by the eight-month-long war and the decision by Russia to ban exports due to Ukrainian drone strikes on its refineries.

The national average for a gallon of diesel in the U.S. was $6.37 on Friday, according to AAA, after hitting a record $6.52 on Sept. 22.

Diesel prices have hit records in Europe, too, and refined product shipments from the Persian Gulf producers have fallen due to war damage and blocked export routes.

Michael Lynch, a distinguished fellow at the Energy Policy Research Foundation, said the release of diesel in Europe might mean less exports of diesel from the U.S., which could lower prices by 25-50 cents per gallon after a few weeks.

Political Context and Immediate Action

President Donald Trump said the diesel release would happen immediately, echoing a G7 promise to start with a "frontloaded substantial release" of diesel within the next 20 days and the rest over four months.

Trump and his Republican Party face pressure to address surging prices ahead of the Nov. 3 midterm elections.

The president's approval ratings on the economy hit a new low, according to an AP-NORC poll, as the Iran war and his trade battles have increased U.S. prices for oil and other goods.

Trump had a conversation overnight with Macron about the need to address rising fuel prices and the availability of petroleum products.

Macron on Friday then chaired the videoconference of G7 leaders to discuss the issue.

Trump on Thursday embarked on what he said would be a 32-day marathon of rallies to try to bolster his party's chances for keeping control of the U.S. House and Senate in the November elections.

Market Impact and Future Risks

The statement pushed U.S. oil prices down 2%, but the impact was lessened by a lack of clarity on whether the 100 million barrels are in addition to the 426 million barrels already agreed upon in March.

Some Republicans in the U.S. had called for Trump to ban U.S. exports of diesel to try to bring domestic prices down.

However, the G7 statement said the group agreed not to limit energy exports to each other.

Oil market analysts warn a U.S. export ban could lower prices in the short term but eventually backfire by reducing supplies of gasoline since diesel output can't be lowered without also cutting overall refinery production.

Jim Krane, an energy research fellow at Rice University’s Baker Institute, said draining stocks will reduce retail fuel prices for a while, at the cost of leaving Europe with less emergency cover.

Krane added that at some point in the future Europe and the rest of the G7 will have to refill their strategic reserves, which they normally try to do when prices are low, but nobody knows when that will happen.