The head of the International Energy Agency has cautioned countries against the urge to hoard oil and fuel during the energy crisis triggered by the U.S.-Israel conflict with Iran. If the Strait of Hormuz remains closed, further supply reductions are anticipated.
Fatih Birol stated, "I urge all nations to refrain from imposing export bans or restrictive measures. The global oil market is in a very precarious situation. Their trading partners, allies, and neighboring countries will be adversely affected."
Birol indicated that "major Asian nations with large refineries" should reconsider any export restrictions. "If these countries continue to limit or completely ban exports, the impact on Asian markets will be significant."
He called on countries to avoid implementing bans, a message likely directed at the United States, where rumors are circulating about a potential ban on refined fuel exports as gasoline prices exceed $4 per gallon and California faces threats of aviation fuel shortages. So far, U.S. Energy Secretary Chris Wright has only ruled out the possibility of banning crude oil exports.
Birol noted that some countries are already stockpiling energy, which undermines the effectiveness of the IEA's actions. To stabilize markets during the current conflict, the IEA has released 400 million barrels of crude and fuel from emergency reserves.
"Unfortunately, during our coordinated release of oil stocks, we have observed some countries increasing their existing inventories. They are hoarding. This does not help. In my view, it is time for all nations to demonstrate that they are responsible members of the international community," he said.
According to the latest weekly report from the U.S. Energy Information Administration, U.S. inventories have increased by 5% year-on-year, despite the country being the largest contributor to the IEA's plan.
Asia has felt the energy crisis most severely thus far, with some nations beginning to ration fuel and reduce weekly working days.
Although diesel and aviation fuel prices have surged significantly in the West, Birol stated that "Europe is not currently experiencing actual shortages of aviation fuel or diesel." However, he added that the situation could change in the coming weeks if transport disruptions in the Middle East persist.
As IEA chief, Birol has been at the center of discussions on how to address the crisis. He warned that if the Strait of Hormuz does not reopen to shipping, "the volume of crude and refined products we will lose in April will be double that of March." Under normal circumstances, one-fifth of the world's oil and liquefied natural gas passes through this strait, but it is currently nearly closed due to Iran's threats to fire on vessels.
He cautioned that even after the conflict ends, it will take a long time for normalcy to return.
"We are tracking the situation of all key energy assets in the region every day, every hour," he said, referring to oil and gas fields, pipelines, refineries, and LNG terminals. "Currently, 72 energy facilities are damaged, with one-third suffering severe or very severe damage," he added.
Birol praised Saudi Arabia's swift response to the crisis, as the country has diverted over two-thirds of its oil exports to the Red Sea via a pipeline, bypassing the Strait of Hormuz.
He stated that "the highest authorities in Saudi Arabia" have assured him that this critical pipeline "is well protected." However, he noted that a successful attack on this route would have "extremely dire consequences" for the global economy.
Birol also remarked that the current crisis will reshape the world's energy system, much like the crises of the 1970s and the one triggered by the Russia-Ukraine conflict in 2022. He pointed out that the oil crises of the 1970s spurred a nuclear energy boom, leaps in automobile engine efficiency, and accelerated the issuance of oil and gas licenses in the UK North Sea.
He predicted that the current crisis will spark a renewed nuclear revival, an electric vehicle boom, and drive further renewable energy development, while also prompting some countries to burn more coal.
However, he stated that after experiencing two energy shocks within four years, the natural gas industry, which has long portrayed itself as a reliable supplier, will "need to work to rebuild its reputation."
Birol also warned that the UK cannot replicate its oil boom. "Most of the oil that could be extracted in a cost-effective manner has already been extracted," he said. "Back then, the UK had 5% of the world's oil and gas. Today, that figure is about 0.7%."
Comments