- Emergency measures do not cover DKK 20 million. barrels per day supply loss.
- Supply shortages could hit Europe in April, Asia already hit, officials warn.
- Airlines and fertilizer producers brace 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 highs, executives and oil ministers said Tuesday.
Executives and energy ministers warned that emergency measures by governments around the world have so far failed to close the massive shortage of oil and gas supplies caused by the ongoing US-Israeli conflict with Iran.
Energy, fertilizer and petrochemical costs are skyrocketing as the world loses as much as 20 million barrels of oil per day from Middle East producers due to Iran’s effective closure of the shipping choke point in the Strait of Hormuz. The impact of the reduction of a fifth of global oil and gas supplies has spread rapidly through economies and supply chains.
United Airlines said Tuesday it may have to raise fares by up to 20%. The Philippines declared a national energy emergency. The acute energy supply shock now 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 measures to reduce energy consumption, including implementing four-day work weeks and asking citizens to limit travel and use stairs rather than elevators.
Governments around the world are releasing a record 400 million barrels of oil from strategic reserves into the market, and the United States has waived sanctions on some Iranian and Russian oil to allow supply-strapped refiners to buy it.
“These are not even stopgap measures,” Sheikh Nawaf Al-Sabah, chief executive of Kuwait Petroleum Corp, said on Tuesday.
Kuwait produced about 2.6 million barrels of oil per day before the war and has had to cut output and halt supplies to refineries that buy its crude.
Saudi Arabia and the United Arab Emirates have withheld some exports from pipelines that bypass the Strait of Hormuz. But these exports, as well as the other emergency measures, do not come close to covering the supply disruption, Al-Sabah said.
All in all, the emergency measures were not even a “drop in the proverbial barrel,” he said.
Coordinated releases from strategic reserves were not enough to address supply shortages, said Takehiko Matsuo, Japan’s vice minister for international affairs. His country is contributing about 80 million barrels to the strategic stockpile release 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, German Economy Minister Katherina Reiche and Shell CEO Wael Sawan both said.
“We’re trying to work with governments to just alert them to the different levers they need to pull, including on the demand side, including what they need to do around storage, what they need to do around procurement,” Sawan said.
Lack of preparation 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 the strategies that actually look five, 10 years out and build resilience from now.”
It would be difficult for operators in the United States, the largest oil-producing nation, to meaningfully lift output through 2027 regardless of prices, ConocoPhillips CEO Ryan Lance said.
U.S. manufacturers are executing 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 cannot make up for the supply shortfall from the Middle East because they are already at maximum production, said Matt Schatzman, CEO of U.S. LNG producer NextDecade.
“None of this is going to be solved overnight,” he said. “This is a bad situation. Don’t you think we’d go faster if we could?”
