The Group of Seven (G7) on Friday has agreed to release nearly 100 million barrels of oil and petroleum from its emergency reserves over the next four months, in its attempt to ease the sharp increase in global energy prices. The release, will include a substantial amount of diesel within the first 20 days, reflecting the growing pressure in refined fuel markets. The decision comes as the global energy market has increasingly shifted from a conventional crude oil shock towards a refined-products shortage where disruptions to oil flows through the Strait of Hormuz and lower exports from major suppliers, have tightened supplies of diesel and other refined fuels.
Why is diesel suddenly the problem?
The current energy shock is unusual as crude oil and refined fuel markets are experiencing different levels of stress. While some Middle Eastern crude exports have begun recovering, refined-product supplies remain much tighter. Europe, in particular, has become increasingly dependent on imports to supplement domestic diesel production, while disruptions to Russian and Middle Eastern supplies have reduced available volumes. The US has also been facing a diesel shortage with inventories falling to around 107.9 million barrels in September, the lowest in more than four decades,. Global diesel prices hit a record high last Friday with average price for a gallon (3.79 litres) of diesel rising to $6.50.
This has created pressure for governments to act now. Earlier last week, US president Donald Trump threatened to restrict diesel exports to Europe unless European countries released more of their strategic stocks. Such a move could have helped US consumers in the short term but would have further tightened European supplies. However, the release is not a permanent solution. The International Energy Agency had already committed to releasing 400 million barrels of emergency stocks earlier this year, with around two-thirds reportedly released by the end of September. This means governments are increasingly using emergency inventories to compensate for disruptions that have not yet been resolved.
Will the release actually bring prices down?
The immediate market reaction suggests investors believe the release will provide some relief, although expectations remain limited. European diesel futures fell sharply following news of the agreement, while US diesel futures also declined. Brent crude briefly moved below USD 100 per barrel before recovering back to USD 102, suggesting that markets do not view the release as sufficient to eliminate the broader supply risk.
There are also limits to what strategic reserves can achieve. Emergency stocks can temporarily replace barrels that are unavailable, but they cannot permanently compensate for disrupted production or shipping routes. If the Strait of Hormuz remains constrained or Russian refinery disruptions continue, the additional supply could simply delay rather than resolve the shortage. The G7 is therefore buying time for the market. The longer-term solution still depends on the normalisation of global energy flows and increased refinery output. S&P Global described the move as a temporary measure against a much deeper supply problem, noting that it does not resolve the underlying tightness in global markets.
What does this mean for Sri Lanka?
With Sri Lanka already absorbing a substantial increase in its fuel import bill, the G7 announcement is highly relevant. The country has spent approximately USD 4.0 billion on fuel imports during January–August 2026, a 61.6% increase from the same period last year. A sustained easing in international diesel prices could therefore provide relief on two fronts. First, it would reduce the foreign exchange required to finance fuel imports. Second, it could reduce pressure on transport costs, helping to contain the pass-through of energy prices into overall inflation.
For Sri Lanka, the G7 release is therefore a positive short-term development, but the bigger benefit would come from a sustained normalisation of global diesel prices rather than temporary reserve releases. This is especially relevant given the country’s recent dependance on refined oil for consumption and production needs.