Japan, the United States, China and other countries announced that they would coordinate to release crude oil from their emergency reserves. The reason: high crude oil prices are getting in the way of economic recovery from the coronavirus pandemic.

       The aim is to lower prices by temporarily increasing supply, but the amount of crude to be released is limited. The positive effects of this measure are questionable.

       The oil reserve system was implemented by various countries in response to the 1970s oil crisis. Its main purpose is to reserve oil for when supply is disrupted due to such circumstances as deterioration of the political situation in the Middle East or natural disasters. It is extremely uncommon for the stock to be used to curb prices.

       Japan has around 145 days' worth of national oil reserves. Rules stipulate that it must maintain "at least 90 days' worth of oil," and the government says it will sell one to two days' worth of domestic demand from the excess amount.

       Oil prices surged from around the summer when economic activity resumed, and by late October futures hit a seven-year high. This has an impact on a wide range of areas, from gasoline to utilities to food products, causing strain on corporate management and household finances.

       The administration of U.S. President Joe Biden is said to have led the oil reserve release initiative, likely out of fear that high gasoline prices during the holiday season would spur further decline in Biden's approval ratings. In addition to Japan and China, India, the U.K. and South Korea also agreed to a tandem release of their oil reserves.

       The problem is that while the measure might work as a political appeal, it doesn't look like it will lead to stable oil prices. The common market take on the situation is that prices might go down once, but the effects will not be long-lasting.

       There is concern that the measure might invite the opposite effect if the Organization of the Petroleum Exporting Countries (OPEC) or Russia object to the move, and respond by producing less oil.

       If we are aiming to truly stabilize prices, collaboration with oil-producing countries is crucial. It is said that their refusal to accede to the request to up production was spurred by anxiety over the global pursuit of a decarbonized future.

       As awareness of global warming increases, there is a strong trend in the financial community to refrain from fossil fuel-related loans and investments, making it difficult to develop new oil fields.

       Moving toward decarbonization is a must. At the same time, unless we use fossil fuels until renewable energy and hydrogen power generation become widespread, economies and societies will be unable to function and exist.

       How do we shift to a carbon-free society while avoiding the destabilization of the crude oil market? Oil-consuming countries such as Japan and the U.S. must engage in candid discussion with oil-producing countries and draw up a long-term strategy for a smooth transition.

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