By Adam Currie — Exclusive to Oil Investing News
With crude prices surging, some of the world's leading powers are becoming more innov ative in their attempts to rein in prices. With debate rife on whether to release strategic reserves, many are questioning the legality of such a move, as well as whether it is being made for political gains.
In an unprecedented move, Saudi Arabian Oil Minister Ali Naimi recently mounted his most direct attack against increasing oil prices, but still has shown no sign of moving to increase supplies, despite talks by the US, France, and Britain relating to the release of strategic reserves. Two weeks after rumors emerged that the US was set to agree on tapping emergency stockpiles, French Energy Minister Eric Besson confirmed that the European nation was in talks with authorities about a similar move. The market has shown minimal response to the rumors, with some analysts warning that at best the move would have only a “limited and temporary” effect. Threat to economies In theory, a nation's emergency reserves are held in the event of a natural disaster or a major crisis such as a war. However, with prices continuing to climb on the back of supply concerns, there is increasing concern that fuel costs have the potential to damage a still fragile global economic recovery. Analysts have continued to question the move, stating that it would have little effect on prices in the long term. Speaking to a media source last week, Luca Baccarini of Energy Funds Advisors said a "tactical use of the reserves would certainly have an impact on the market but it would be temporary because the underlying problem is an increase in demand, while supply is limited by constraints on production." Saudi minister speaks out At the same time, the Financial Times published an opinion piece by Saudi Oil Minister Ali Naimi, head of the world's largest crude oil exporter, who stated that the feared shortage of supplies is a "myth," before reiterating that Saudi Arabia is able and willing to meet any gap in supplies.