- Emergency measures fail to cover a supply loss of 20 million barrels per day.
- Supply shortages may hit Europe in April, while Asia has already been hit, 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 fuel, fertilizer and petrochemical prices to record levels, oil executives and ministers said Tuesday.
Executives and energy ministers warned that emergency measures taken by governments around the world have so far failed to close the huge shortfall in oil and gas supplies caused by the ongoing US-Israel conflict with Iran.
Energy, fertilizer and petrochemical costs are soaring as the world is losing up to 20 million barrels of oil a day from Middle East producers due to Iran’s effective closure of the Strait of Hormuz bottleneck. The impact of a one-fifth reduction in global oil and gas supply has spread rapidly through economies and supply chains.
United Airlines said Tuesday it may have to raise ticket prices by up to 20%. The Philippines declared a national energy emergency. The acute energy supply shock now affecting Asia, the region most dependent on Middle East supplies, 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 implementing four-day work weeks and asking citizens to limit travel and use stairs instead of elevators.
Governments around the world are releasing a record 400 million barrels of oil from strategic reserves onto the market, and the United States has waived sanctions on some Iranian and Russian oil so supply-strapped refiners can buy it.
“These are not even interim measures,” Sheikh Nawaf Al-Sabah, chief executive of Kuwait Petroleum Corp., said on Tuesday.
Kuwait produced about 2.6 million barrels a day of oil before the war and has had to reduce production and suspend deliveries to refineries that buy its crude.
Saudi Arabia and the United Arab Emirates have kept some exports flowing through pipelines that bypass the Strait of Hormuz. But those exports, as well as the other emergency measures, do not cover the supply disruption, Al-Sabah said.
In all, the emergency measures were not even a “proverbial drop of water,” he said.
Coordinated releases of strategic reserves were not enough to address the supply shortage, said Takehiko Matsuo, Japan’s Vice Minister of International Affairs. His country contributes about 80 million barrels to the strategic release of stocks coordinated by the International Energy Agency. Japan has about three weeks of gas in storage, he said.
Supply shortages could hit Europe in April if the war continues, both German Economy Minister Katherina Reiche and Shell CEO Wael Sawan said.
“We are trying to work with governments to alert them to the various levers they will have to pull, including on the demand side, including what they need to do on storage and what they need to do on purchasing,” Sawan said.
The lack of preparedness has exacerbated the challenges for Europe and other parts of the world, he added.
“The problem is that we are more in reaction mode,” Sawan said. “The best energy strategies are those that really look five or ten years from now and create resilience from now on.”
It would be difficult for operators in the U.S., the largest oil-producing country, to increase production significantly through 2027, regardless of prices, said ConocoPhillips CEO Ryan Lance.
U.S. producers are executing spending plans they set 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 for the Middle East supply shortfall because they are already at peak production, said Matt Schatzman, chief executive of U.S. LNG producer NextDecade.
“None of this will be solved overnight,” he said. “This is a bad situation. Don’t you think we would go faster if we could?”
