It’s the ‘Biggest Disruption in World History’ of Oil
In this 2012 file photo, fishermen work in front of oil tankers south of the Strait of Hormuz, off the shore of the town of Ras Al Khaimah in the United Arab Emirates. (AP Photo/Kamran Jebreili, File)
The The Wall Street Journal is taking a wide view of the Iran war’s impact on global energy markets, warning under the headline “The Long-Feared Persian Gulf Oil Squeeze Is Upon Us.”
Tehran has effectively shut down the Strait of Hormuz, halting crude shipments through one of the world’s most critical energy chokepoints. Analysts say the move appears designed to make the conflict economically painful worldwide and pressure the United States to back down.
“In the whole written history of the strait, it has never been closed—ever,” said Natasha Kaneva, an analyst at JPMorgan Chase. “To me, it was not just the worst-case scenario. It was an unthinkable scenario.”
More than a week into the conflict, experts say the world is experiencing its most severe shock to energy markets since the 1970s oil crises. If shipping through Hormuz does not resume within days, oil production in the region could fall by more than 4 million barrels per day, and potentially more than double that by late March—nearly a tenth of global demand.
Another major development came Monday when Bloomberg reported that Saudi Arabia—the world’s largest oil exporter—has begun cutting production, following the lead of several smaller producers.
The disruption goes beyond crude oil, which has already climbed above $100 per barrel. Qatar has shut down its massive Ras Laffan Industrial City facility after Iranian drone attacks. The closure instantly removed about 20% of the world’s liquefied natural gas supply from the market. Middle Eastern aluminum smelters are also scaling back operations because of the growing instability.
The global impact is expected to vary by region. The United States—now a major energy exporter—is better positioned than during past oil crises, though rising gasoline and jet-fuel prices are already squeezing consumers and airlines and complicating the economic agenda of Donald Trump.
Meanwhile, Europe and Asia, which rely much more heavily on Gulf oil and natural gas, are shifting into emergency mode.
“We are looking at what is by far the biggest disruption in world history in terms of daily oil production,” said energy historian Daniel Yergin. “If it continues for weeks, it will reverberate across the entire global economy.”
About Post Author
