The US-Israeli war on Iran, now in its eighth day, could leave consumers and businesses worldwide facing weeks or months of higher fuel prices even if the conflict ends quickly. Suppliers are grappling with damaged facilities, disrupted logistics, and elevated risks to shipping, creating a complex global supply chain crisis.
This outlook poses a significant global economic threat and a political vulnerability for US President Donald Trump leading into the midterm elections. Voters are sensitive to energy bills and generally unfavourable to foreign entanglements, adding pressure on the US regime. Global oil prices have surged by more than 25% since the start of the war, driving up fuel costs for consumers worldwide.
The national average petrol price in the US reached $3.41 per gallon ($0.9 per litre) on Saturday, rising by $0.43 over the past week. Goldman Sachs warned that oil prices could climb above $100 per barrel if shipping disruptions continue. US crude oil settled at just below $91 per barrel on Friday – its largest weekly gain on record since 1983, indicating prices could continue to rise.
JP Morgan analysts, according to Reuters, stated earlier this week: “The market is shifting from pricing pure geopolitical risk to grappling with tangible operational disruption, as refinery shutdowns and export constraints begin to impair crude processing and regional supply flows.”
The conflict has already led to the suspension of about a fifth of global crude and natural gas supply, as Tehran targets ships in the vital Strait of Hormuz between its shores and Oman and attacks energy infrastructure across the region. A nearly complete shutdown of the strait has forced the region’s top oil producers – Saudi Arabia, the UAE, Iraq, and Kuwait – to suspend shipments of up to 140 million barrels of oil (equal to about 1.4 days of global demand) to global refiners.
More than 80% of global trade moves by sea, according to the World Bank, meaning disruptions in the waterway could increase freight costs and delay deliveries of goods. As a result, oil and gas storage at facilities in the Gulf is rapidly filling, forcing oilfields in Iraq and Kuwait to cut production, with the UAE likely to follow suit.
A source with a state oil company in the region, who asked not to be named, told Reuters: “At some point soon, everyone will also shut in if vessels do not come.” Amir Zaman, head of the Americas commercial team at Rystad Energy, said oilfields forced to shut in across the Middle East due to shipping disruptions could take a while to return to normal.
Meanwhile, Iranian forces are targeting regional energy infrastructure, including refineries and terminals, forcing them to shut down as well, with some operations badly damaged by attacks and in need of repairs. Qatar declared force majeure on its huge volumes of gas exports on Wednesday after Iranian drone attacks, and it may take at least a month to return to normal production levels. Qatar supplies 20% of global liquefied natural gas (LNG).
Saudi Aramco’s mammoth Ras Tanura refinery and crude export terminal has also closed due to attacks, with no details on damage. Economists warn that the situation could create a combination of higher prices and slower growth, exacerbating global economic challenges.
Source: www.aljazeera.com