The decision by France and a number of other countries to dip into their strategic oil reserves will not lead to a significant long term reduction in oil prices, experts have told the VOR, calling the decision a psychological game, because other factors are responsible for the fluctuating prices of crude oil. France’s decision to open up its oil reserves was disclosed by the country’s industry and economics minister, Erick Besson, who said that the U.S. had influenced France's decision.
According to the Financial Times, America had initially approached Germany, but Berlin said that the country’s national oil reserves could be used only to make up for physical deficit of fuel, but France was more willing. Paris showed a readiness to open up its strategic reserves to minimize the fallout from the Western oil embargo against Iran, as well as to bring down the price of petrol inside the country. Oil prices are going through the roof right now, and the U.S. and other Western nations have tried to manipulate the price of oil with the help of their reserves. Oil intervention may be repeated, says Vladimir Revenkov, an expert at the Institute of Energy and Finance. Tape.
“Strategic oil reserves were established under the aegis of the International Energy Agency, and they were created with the aim of stabilizing the global economy and oil markets. Hence the possible release of oil into the market. Last year the markets were flooded with 60 million barrels of reserves, due to the so-called Arab spring, but experience had shown that such measures are extremely ineffective.
Experts stress that to bring down oil prices on the market, several countries would have to open up their strategic reserves. The U.S. and France are currently holding talks with Britain and Japan, but no tangible results have been achieved. France's desperate action may have an impact inside the country, experts say. But the statement by Paris seems to be a bluff, says Constantine Simonov, chief of the National Energy Security Foundation. Tape.
“ Its is more of a psychological pressure; the making of a statement is more important than dipping into the oil reserves. Very often, oil market traders hardly notice significant events in the sector, but they react to statements. It is difficult to say which of the statements will have an impact. The EU doesn’t have huge reserves, that could be used to flood the market. The statements will not alter the oil price trend”, Constantine Simonov said.
The price of oil has remained at the 100 dollar per barrel mark for more than a month now, and after the statement by France, the price of the Brent crude fell by 112 cents, but it now sells for 120 dollars a barrel. Speculators are operating on the market and the output of the light crude has dropped, dashing any hope of bringing down the price of oil any time soon.
The fear of uncontrolled increase in the price of black gold is connected with the anti-Tehran oil embargo. Iran is the world’s fifth and second OPEC biggest oil producer. Saudi Arabia is the leading OPEC oil producer, and El Riyadh has pledged to fill the void to be left by the absence of Iranian crude on the global market.
