“The biggest supply shock in history.” This is how they want to deal with the oil confusion
The war between the United States and Israel against Iran, which began on February 28, caused a shock on global commodity markets and an increase in oil prices. Since the beginning of the conflict, the price of Brent crude oil has increased from approximately $70 to $120. per barrel on Monday.
The Strait of Hormuz remains a key point, through which approximately one fifth of the world's oil and gas supplies flow. The route has been paralyzed by hostilities and the threat of drone and missile attacks.
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The fastest increase in oil prices is felt by transport and logistics, especially the aviation industry, where fuel accounts for 20-40 percent. operating costs. Jet fuel prices increased from $85-90 to $150-200. per barrel.
Airlines such as Air New Zealand, Qantas, SAS and Hong Kong Airlines have increased ticket prices and fuel surcharges, in some cases by more than 35%. Finnair warned that if the conflict continues, fuel availability may also be a problem, which may force some carriers to limit flights.
Countries react to the situation on the oil market. “The biggest supply shock”
“This is the biggest oil supply shock in history,” Cornell University economic history researcher Nicholas Mulder told The Associated Press. He added that the reduction in supplies today is three to four times greater than during the oil crises of 1973 and 1979.
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The 1973 crisis was caused by the Arab oil embargo on countries supporting Israel during the Yom Kippur War, and the 1979 crisis was caused by the decline in oil production after the revolution in Iran.
Countries around the world have implemented a range of defense mechanisms in recent days, from direct price interventions to drastic consumption restrictions.
The Hungarian government introduced a ban on the export of crude oil and key fuels – diesel and gasoline – and released fuel reserves sufficient for 45 days. Croatia has introduced fuel price limits, and Lithuania is considering lowering excise taxes.
US President Donald Trump's administration – according to Reuters – is considering intervention in the oil futures markets by the Federal Reserve, restricting exports and suspending federal fuel taxes. The market is also speculating about the coordinated release of reserves by the G7 countries.
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Some countries are introducing energy saving measures. Pakistan closed schools for two weeks and introduced remote work. Thailand has suspended foreign business trips for officials and is promoting the use of stairs instead of elevators, and the Philippines has introduced a temporary four-day working week. Vietnam and Bangladesh are also encouraging working from home and have shortened university opening hours.
Blockade of the Strait of Hormuz. The crisis is hitting the fertilizer market
The blockade of the Strait of Hormuz forced countries such as Saudi Arabia, the United Arab Emirates, Iraq and Kuwait to cut production as they ran out of storage space.
Pipelines bypassing the Strait of Hormuz – including: the Saudi East-West to the Yanbu port and the Emirati Habshan-Fujairah port – can only transfer about 3-4.7 million barrels a day. This is a small part of the need; approx. 85 percent exports from the Persian Gulf remain blocked.
Look: The price of oil in the world is going crazy. Here's what this means for Polish drivers
The energy crisis is also hitting the fertilizer market. Approximately 30% of the water flows through the Strait of Hormuz. global export of components for their production, including urea, ammonia and sulfur. In the US, some suppliers have suspended sales until prices stabilize, which – according to farmers quoted by the BBC – undermines the profitability of cotton, corn and soybean crops.
Fuel accounts for 50-60 percent. operating costs of maritime transport. Shipowners are slowing down ships to reduce fuel consumption, which is extending delivery times for consumer goods.
Analysts warn that if the conflict does not end soon, oil prices may rise to $150. per barrel, which would reduce global demand and could lead to a recession – as after the previous oil shocks in 1973, 1979 and 2008.
