US Iran War: Due to the ongoing war in the Middle East, oil supply is being adversely affected across the world. During this time, the Strait of Hormuz was badly closed, due to which the movement of oil came to a halt. This is being considered as the biggest supply shock till date. According to Reuters calculations based on data from the International Energy Agency and the US Department of Energy, more than 12 million barrels of oil supply is being affected daily. This is about 11.5% of the total demand of the world. According to this, about 624 million barrels have disappeared from the supply market in 52 days.

According to the IEA report, 4.5 million barrels of oil was lost due to the 1973 Arab oil ban. 5.6 million barrels of oil were lost during the 1979 Iran Revolution and 4.3 million barrels during the 1991 Gulf War. At present, not only crude oil but also natural gas, refined fuel (diesel, jet fuel) and fertilizers have been affected simultaneously.

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Impact on LNG and gas

Qatar’s LNG production has been affected due to the Middle East war. This is a large part of the world from where gas is produced. Today the world is more dependent on gas than before. There has been a shortage of jet fuel and diesel due to reduced production in Gulf refineries. Transport and aviation have been affected in many countries.

effect on prices

Due to the war, the price of oil has increased from $70 to approximately $95 per barrel. There is a possibility of this increasing further. During this period, countries like Saudi Arabia and UAE have also been affected. Due to closure of the Strait of Hormuz, they are also not able to export. There is a shortage of supply in Asia and Africa right from the beginning. Due to the current situation, pressure on the global market is increasing.

Oil supply is decreasing rapidly

Due to the ongoing war in the Middle East, the supply of oil is decreasing rapidly. The stock that was accumulated earlier is also on the verge of being exhausted. According to estimates, by the end of this month, around 650 million barrels of oil supply would have been lost. The daily supply of about 13 million barrels of oil has stopped. Apart from this, due to the American blockade imposed on April 13, there has been a further reduction of 1.3 million barrels per day, because Iran’s oil is not able to reach the market.

How big an impact has the closure of the Strait of Hormuz had on supply?

Oil export figures also clearly show how bad the situation is. By the end of March, there was a decline of 6.9 million barrels per day of crude oil sent by sea in the world. By April 20, it declined further by 1.8 million barrels per day. That means the overall supply has reduced by 8.8 million barrels per day as compared to earlier. If the situation continues like this, then this will be the lowest supply level after the Covid period of June 2020. Many countries have oil reserves, but even these cannot compensate for such huge and continuous losses. If these reserves are used now, more oil will be needed to replenish them later.

Is this crisis bigger than previous oil crises?

There was also an oil crisis in 1973, when about 7 percent of the world’s supply was lost. But at that time the situation could have been improved through talks. Today’s situation is different. Currently about 13 percent supply has been affected and this is a real disruption, which is not easy to fix quickly. The Middle East supplies about 30 percent of the world’s oil. If the situation worsens, this part may also be in danger. Even if the war ends quickly, it may take months or even years for supplies to return to normal.

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