IEA chief Birol warns of biggest energy crisis ever as Hormuz disruption persists

Left · 1Fatih Birol, executive director of the International Energy Agency (IEA), says the world is facing the biggest energy crisis ever, according to Al Jazeera. 1 Left · 1Al Jazeera attributes the crisis to the US-Israel war on Iran, which it says has disrupted shipping in the Strait of Hormuz, a waterway for 20 percent of the world's oil and liquefied natural gas. It says the crisis has continued for more than seven months with little relief in sight. 1 Left · 1Birol says global oil stocks are declining fast. G7 countries and IEA members have tapped strategic emergency reserves, but the relief has been short-lived. 1

Left · 1Al Jazeera adds that the Russia-Ukraine war is straining the oil industry further, as both countries target each other's energy facilities. Birol warns of serious consequences for the world economy if Middle East tensions are not resolved, and of challenging months ahead as Northern Hemisphere winter approaches. He also says the energy sector will take time to recover and will likely never be the same. 1 Right · 1Hot Air, a US right-leaning blog, runs a commentary quoting a McKinsey Global Institute post that calls Hormuz the largest energy supply shock on record. The post says that at its peak the disruption took 14% of global oil and gas supply off the market, more than double the 1970s oil shocks in relative terms and more than six times the peak impact of Russia's 2022 invasion of Ukraine. 2 Right · 1The same post says three buffers absorbed the shock: strategic stocks, including an IEA-coordinated release in March with the US pledging 172M barrels; bypass pipelines in Saudi Arabia and the UAE; and flexible trade. It warns these buffers are being used up, with the US Strategic Petroleum Reserve at its lowest since 1982. 2

Right · 1The Hot Air piece also relays market commentary that Middle East crude flows excluding Iran are holding at about 75% of pre-war levels, down from a peak of about 95% in late September. It says Iran has sunk ships in the strait and that Hormuz remains closed for Iran itself. 2 Right · 1It further cites IEA estimates that global oil production topped 100 million barrels a day in September, still slightly below demand of about 103.5 million. It says the IEA's October Oil Market Report warned that diesel constraints could last well into 2027. 2 Right · 1The author argues that US diesel pressure stems largely from a lack of refining capacity rather than a lack of oil. The author blames refinery closures on the net-zero movement and Democratic administrations, and cites Wood Mackenzie's Alan Gelder on poor returns for oil majors in refining. The piece notes concern in Washington about food prices ahead of the November midterm elections and the idea of a diesel export ban. 2