Germany Puts Oil Reserves on the Block

Germany has begun selling a small fraction of its oil reserves as part of an international action aimed at deflecting the damage from hurricane Katrina.

Sale of the oil, which Germany and 26 other countries agreed to free up earlier this week, started in Rotterdam Wednesday.

Germany's decision to join other International Energy Agency nations and put emergency reserves on the market was not merely out of solidarity with the devastated US region, Chancellor Gerhard Schröder said. It was a necessary bid to calm oil prices in the wake of the disaster.

The IEA plans to sell two million barrels of oil a day for the next month.

"We’re assuming that this oil will create a sufficient energy supply on the market and also reduce the pressure on oil prices," Schröder told reporters.

Questioning the sale

But some experts, like Bernhard Hillibrand from the RWI Essen research institute, said releasing oil reserves won’t necessarily solve the problem. "You can release oil supplies for two months, for example. But what nobody can say for sure is if this will bring down the prices at the same time. Impulse buying might cause them to rise," he noted.

Numerous politicians have accused the oil and gas industries of unscrupulously profiting from pressured oil production due to the ongoing Iraq war and now the disasterous hurricane in the United States.

In possible his last state-of-the-nation address ahead of national elections Sept. 18, Schröder called high oil prices "a serious threat to the nation's economy," and said he would pursue a G8 initiative for more transparency in the oil market. He called for a politics that will minimize Germany's dependency on oil, and lambasted oil companies that engage in "irresponsible price gouging" as being neither ethical nor moral.

He also took the opportunity to sharply attack the opposition CDU for its stated wish to bring back atomic energy. Schröder called it a "strategy doomed to failure."

Oil, gas link challenged

In addition, the chancellor questioned whether oil and natual gas prices need to be linked, as is currently the case. "It is unsure whether the tie between oil and gas prices is really justified under current conditions," Schröder said during a speech in the Bundestag.

Consumer Affairs Minister Renate Künast did not beat around the bush. "The coupling of natural gas (and oil) prices must finally be abolished," Künast told Bild newspaper on Wednesday. "Russian gas has nothing to do with Arabian oil."

Schröder and Künast have said they would like the Federal Cartel Office to look into the matter. In Germany, oil and natural gas prices have been linked since the 1960s.

But Finance Minister Hans Eichel commented that a decoupling wouldn't change much, because energy prices have risen in general. By the end of this year, natural gas prices are expected to have increased by 15 percent since December.

Schröder's Social Democratic colleague and party head Franz Müntefering said he doubted such a decoupling would be effective and noted that price linking was connected to international agreements that have been around for decades.