How did the closure of the Strait of Hormuz cause the worst energy crisis in history?
The International Energy Agency described the global energy crisis as the worst energy disruption in history, surpassing even the 1973 Arab oil embargo. The market lost approximately 400 million barrels of oil, and Brent crude prices plummeted to $120 per barrel. Gas prices in Europe also soared to record highs since the start of the war.
Production halted
Jet fuel prices in Europe hit a record high of around $220 a barrel, a cost that is likely to be quickly reflected in airfare prices.
Oil prices have also been reflected in nitrogen-containing products such as urea, which is the most important fertilizer product, by a percentage ranging between 30 and 40% since the start of the conflict.
Fertilizer plants in India, Bangladesh and Malaysia are moving towards halting orders, reducing production or shutting down completely due to shortages of raw materials.
Dan Pickering, chief investment officer at a global company, said: “This crisis cannot be overcome by saving. What will happen is that prices will rise to a point where people will stop consuming.”.
Aditya Saraswat, senior vice president of a consulting firm, added: “The breadth of risks here in the areas of fuels, chemicals, liquefied natural gas and fertilizer inputs is what makes this time qualitatively different from previous episodes of tension in the Gulf region.”.
The closure of the Strait of Hormuz has prevented the passage of 20% of the world's oil and liquefied natural gas since the United States and Israel began their war against Iran, leading to a sharp decline in supplies.
The International Energy Agency described what is happening in the global energy sector as the worst global disruption in the energy sector in history, surpassing even the Arab oil embargo of 1973, as the market lost about 400 million barrels of oil, and Brent prices approached $120 per barrel. Gas prices in Europe have surged to record levels since the war began.
Production Halt
Jet fuel prices in Europe reached a record level of about $220 per barrel, a cost that is likely to quickly reflect on air ticket prices.
Oil prices have also affected products containing nitrogen, such as urea, which is the most important fertilizer product, with an increase ranging between 30% and 40% since the conflict began.
Fertilizer factories in India, Bangladesh, and Malaysia are moving towards halting orders, reducing production, or complete shutdowns due to a shortage of raw materials.
For his part, the Chief Investment Officer at a global company, Dan Pickering, said: “This crisis cannot be overcome by saving; what will happen is a rise in prices to a level that will make people stop consuming.”
Aditya Saraswat, Senior Vice President at a consulting firm, added: “The widening scope of risks here in the areas of fuel, chemicals, liquefied natural gas, and fertilizer inputs is what makes this time qualitatively different from previous episodes of tension in the Gulf region.”
