- Emergency measures fail to cover the loss of supply of 20 million barrels per day.
- Supply shortages could hit Europe in April, with Asia already affected, officials warn.
- Airlines and fertilizer producers are bracing for rising costs.
HOUSTON: The global energy crisis is intensifying as disruptions to oil flows through the Strait of Hormuz continue, leaving markets reeling and pushing prices of fuel, fertilizer and petrochemicals to record highs, oil executives and ministers said Tuesday.
Leaders and energy ministers have warned that emergency measures taken by governments around the world have so far failed to close the massive oil and gas supply gap caused by the ongoing US-Israeli conflict with Iran.
Costs of energy, fertilizer and petrochemicals are soaring as the world loses up to 20 million barrels of oil per day from Middle Eastern producers due to Iran’s effective closure of the Strait of Hormuz maritime chokepoint. The impact of reducing global oil and gas supplies by a fifth has quickly spread through economies and supply chains.
United Airlines announced Tuesday that it may have to increase its ticket prices by up to 20%. The Philippines has declared a national energy emergency. The acute energy supply shock currently hitting Asia, the region most dependent on supplies from the Middle East, will spread to Europe in April, oil executives and energy ministers said this week at the annual CERAWeek conference in Houston, the US energy capital.
In Asia, countries are taking steps to reduce energy consumption, including establishing a four-day work week and asking citizens to limit their travel and use stairs instead of elevators.
Governments around the world are putting a record 400 million barrels of oil from their strategic reserves on the market, and the United States has lifted sanctions on some Iranian and Russian oil so that reserve-strapped refiners can buy it.
“These are not even interim measures,” Sheikh Nawaf Al-Sabah, CEO of Kuwait Petroleum Corp., said Tuesday.
Kuwait produced about 2.6 million barrels of oil per day before the war and has had to cut production and halt deliveries to refiners who buy its crude.
Saudi Arabia and the United Arab Emirates have maintained some exports from pipelines that bypass the Strait of Hormuz. But these exports, along with other emergency measures, are far from enough to cover the supply disruption, Al-Sabah said.
In total, the emergency measures do not even constitute a “drop in the proverbial barrel,” he said.
Coordinated releases of strategic reserves have not been enough to address supply shortages, said Takehiko Matsuo, Japan’s vice minister of international affairs. His country is contributing some 80 million barrels to the release of strategic stocks coordinated by the International Energy Agency. Japan has about three weeks of gas storage, he said.
Supply shortages could hit Europe in April if the war continues, German Economy Minister Katherina Reiche and Shell CEO Wael Sawan said.
“We’re trying to work with governments to just alert them to the different levers that they’ll need to pull, including on the demand side, including what they need to do on storage, what they need to do on purchasing,” Sawan said.
The lack of preparedness has exacerbated the challenges facing Europe and other parts of the world, he added.
“The problem is we are more in reaction mode,” Sawan said. “The best energy strategies are those that span five or ten years and build resilience from here on out. »
It would be difficult for operators in the United States, the largest oil-producing country, to significantly increase production through 2027, regardless of prices, said Ryan Lance, CEO of ConocoPhillips.
U.S. producers are executing on spending plans they laid out earlier this year and can’t easily adjust them, Lance said.
The United States is also the world’s largest producer of liquefied natural gas. But U.S. LNG producers can’t make up the Middle East’s supply gap because they’ve already reached peak production, said Matt Schatzman, CEO of U.S. LNG producer NextDecade.
“None of this will be resolved overnight,” he said. “This is a bad situation. Don’t you think we’d move faster if we could?”
