The International Energy Agency’s (IEA) executive director Fatih Birol said on 16 March, ‘The war in the Middle East is creating the largest supply disruption in the history of the global oil market’. This remark prefaced the announcement of the release of 400 million barrels of oil onto the market from IEA members’ strategic reserves (out of a total of 1.85 billion). Global consumption runs at around 100 million barrels of crude per day. This release was the fifth – and largest – since these reserves were established.

Following the US-Israeli offensive, Iran refused passage through the Strait of Hormuz to tankers and LNG carriers from enemy countries and their allies. As a result of this blockade and the bombing of refineries, oil flows were reduced by 250 million barrels of crude between late February and late March. The shortfall may have reached 600 million barrels by the end of April. In his announcement, Birol indicated that the IEA might release further stocks if necessary.

The initial release seems to have had only a limited impact on oil prices, but without it, the surge might have been much more severe. ‘Now in the past, we’ve never had a disruption this large,’ says Carol Dahl, professor emeritus of economics at the Colorado School of Mines. The price per barrel, around $60 at the start of this year, has been over $100 since the war began, though that is still well short of its historical peak of over $200 during the 2008 economic crisis.

1% of global annual consumption

The war’s impact on natural gas has been similar. The equivalent of hundreds of millions of cubic metres pass through the strait each day in liquefied form, mostly in LNG carriers loaded in Qatar. After five weeks of blockages and infrastructure destruction, the net loss amounted to 1% of global annual consumption. Unsurprisingly, gas prices in Europe have risen, from €30-40 per megawatt hour (MWh) at the start of the year to between (…)

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(3) BP, ‘Statistical Review of World Energy 2021’.

(5) Ibid.

(7) BP and Energy Institute op cit.

(10) International Energy Agency (IEA), ‘World Energy Outlook 2025’.