Lithuania to release oil and fuel reserves to ease rising prices

Lithuania plans to release both crude oil and fuel products from its strategic reserves in an effort to ease rising fuel prices driven by the conflict in the Middle East, Vice Energy Minister Gabrielius Gorbačevskis said Monday.

“Our case will be a mix – some crude oil and various petroleum products such as gasoline, diesel, aviation fuel and other distillates,” Gorbačevskis said during a discussion on rising fuel prices.

He said releasing both crude oil and refined products would help stabilise global markets and eventually lower prices.

“It is very important that different kinds of products reach the market through the release of reserves – both crude oil and products – to have a positive effect on prices and stabilize them over time,” the vice minister said.

According to Gorbačevskis, the fuel released in Lithuania will come from industrial reserves held by companies, meaning the measure will not cost anything to taxpayers.

“The industrial reserve, which companies themselves must purchase, will be released to the market,” he said.

Reserve management differs across regions, Gorbačevskis added. Europe generally stores more refined petroleum products, while countries in North America – including the United States, Canada and Mexico – tend to hold larger stocks of crude oil. Asian members of the International Energy Agency, such as South Korea and Japan, typically maintain a mix of crude and refined products, he said.

However, Emilis Cicėnas, head of the Lithuanian Petroleum Products Trade Companies Association, questioned whether releasing state reserves is the right tool to influence fuel prices.

“I’m not sure that state reserves are meant for trying to play on the oil market or influence prices,” Cicėnas said. “The outcome could be the opposite if we release reserves now and later have to replenish them at a much higher price.”

The International Energy Agency last week authorised member states to release up to 400 million barrels of oil and petroleum products to the market.

Lithuania’s Energy Minister Žygimantas Vaičiūnas said the country could supply around 80,000 tons of fuel from its reserves.

According to Vaičiūnas, authorities will soon prepare a schedule detailing how and in what quantities the reserves will be released over a 90-day period to help curb fuel prices.

Lawmaker Simonas Gentvilas said Lithuania currently holds about 640,000 tons of fuel in its strategic reserves, including around 330,000 tons of crude oil and 240,000 tons of diesel.

Economists sceptical

Several economists working for the country’s major banks have commented that the measure would be largely symbolic and have only a short-term, limited impact on fuel costs.

According to Nerijus Maciulis, an economist at Swedbank, using the reserve would not significantly affect consumers or the state.

“This is just a symbolic step that solves no problem, including the fact that there is no oil shortage problem in Europe, especially not in Lithuania. So, it is not at all clear what is being done here,” Mačiulis said.

Aleksandras Izgorodinas, an economist at Citadele Bank, also said the use of reserves would have only a short-term effect. According to him, it could slightly reduce fuel prices and temporarily stabilise oil prices on the market, but they would rise again once the reserves are depleted.

“Fuel station reserve capacities ensure fuel access for about two to three days. This means that after two to three days, those fuel stations will still have to buy fuel at market prices. The market price will be between 100 and 120 US dollars per barrel. Perhaps for a week or a few weeks, fuel prices would simply stabilise due to this decision, they would not rise, but once the reserve runs out, they will start to rise again,” Izgorodinas said.

Mačiulis said a more appropriate solution would be to reduce demand for oil products.