Kathmandu. The world’s biggest energy crisis has just begun after the US and Israeli attacks on Iran on February 28. Neither a temporary ceasefire nor an end to the Iran war could immediately return the global energy crisis and prices to pre-war levels. <\/p>\n
The pre-war situation refers to a time when cheap oil and gas were plentiful. Businesses were booming, and people’s incomes were growing, regardless of their size. Now, there are a number of factors that make it difficult to restore the pre-war situation. <\/p>\n
Oil shortage just started<\/strong><\/span><\/p>\n On average, it takes about one to one-and-a-half months for a tanker from the Persian Gulf to reach its buyers, i.e. importers. The war had begun just a month and a half earlier. This means that the world will now face a real oil shortage. Because the Strait of Hormuz has been effectively closed during this period. Fatih Birol, the head of the International Energy Agency, says that the situation in April will be much worse than in March. Even the most optimistic projections suggest that the deficit will double. This will lead to inflation and sluggish economic growth. The situation could get worse. Energy rationing will begin soon in many countries. \u2019<\/p>\n The war drove up the price of oil. Before the war, oil tankers carried oil. Now the availability of oil will decrease. Even if Iran opens Hormuz immediately, prices will not return to pre-war levels. A new phase of the oil crisis has just begun. Even under ideal circumstances, it would take a month or a month and a half to restore supply. <\/p>\n In fact, according to a recent report from the U.S. Energy Information Administration, the data arm of the U.S. Department of Energy, the shortage will likely be felt for several months by the end of 2026. However, the case with oil is a bit simpler. If there is a lasting peace in the Middle East, Saudi Arabia and other countries in the region can increase production rapidly. But the gas situation is very serious. <\/p>\n Gas crisis is more serious than the oil crisis<\/strong><\/span><\/p>\n Iran was rapidly returning to LNG to reduce its dependence on world pipelines before the war. Russia used the pipelines as a tool to pressure Europe. This led to the global energy crisis of 2022. Gas was becoming cheaper and cleaner than coal, and its share of energy consumption was steadily increasing. The Iran war has shown how risky this option is. <\/p>\n Before the war, Qatar accounted for 21 percent of the world’s LNG supply, or about 17 percent of the total gas market. It’s such a big chunk that practically no alternative exists. “The war has damaged the credibility of the entire gas industry,” says Fatih Birol. LNG was presented as a reliable and readily available option. But the world first faced a Russian gas crisis in 2022 and now Qatari gas is in crisis. \u2019<\/p>\n LNG supply is unlikely to improve quickly. There is no alternative sea route for exports from Qatar. While bypassing the Strait of Hormuz, oil can be exported to some extent through land pipelines. Moreover, the future is uncertain. As a result, gas prices will remain high for many months. <\/p>\n Qatar has halted the development of new manufacturing capacity. The war has also affected a portion of its existing infrastructure. <\/p>\n Takes a long time to restore the product{<\/strong><\/span><\/p>\n }<\/p>\n Opening Hormuz to oil tankers and gas carriers is an issue. Restoring production at factories in the region, which were damaged by the bombing in a month and a half, is another issue. <\/p>\n According to data from the International Energy Agency, more than 40 oil and gas plants have been damaged by wartime attacks in the Middle East. The Ras Lafan gas field in Qatar has been the worst hit. Iranian missiles destroyed 17 percent of the capacity of the world’s largest gas liquefaction plant. <\/p>\n According to Qatari officials, this type of device is specially made and there is no replacement. Therefore, repairs will take years, not months, to 3 to 5 years. <\/p>\n Other countries have similar problems. Iranian drones have targeted refineries, oil fields and other energy installations in the United Arab Emirates, Kuwait and Iraq. Repairs will take months and cost billions of dollars. Before the war, the fund was allocated to increase global energy supply, but now it will be spent on maintenance. <\/p>\n Governments facing crisis<\/strong><\/span><\/p>\n }<\/p>\n Before the war, the Gulf countries planned to increase their production to meet the needs of a growing population and the global economy. Consuming countries had expected substantial oil and gas supplies to increase. But now Saudi Arabia, the UAE, Iran, Qatar and others will be forced to devote their resources not only to development, but also to restoring previous production levels and strengthening defense capabilities against future attacks. <\/p>\n Consumers will be forced to pay for expensive energy. In addition, people will have to pay more for investments in alternatives such as nuclear, solar, wind, batteries and coal, and subsidies to industry. <\/p>\n Unlike the previous two crises caused by Covid and the Russia-Ukraine war, this time the affected countries have less borrowing capacity. Governments are facing twin problems: high inflation, high public debt and high budget deficits. Slow economic growth reduces government tax revenues and limits the scope of financial support. High inflation prevents interest rate cuts. In addition, the exploitation of strategic oil reserves has already exhausted future resources. <\/p>\n Critical to replenish strategic reserves <\/strong><\/span><\/p>\n Western countries have decided to release 400 million barrels of oil from their strategic reserves to address the oil shortage. Due to the war, 100 to 120 million barrels of oil from the Middle East have not been able to reach the market every day. Strategic reserves release between 300 million and 400 million barrels of oil a day to compensate. These measures are sufficient for 4-5 months. But then these reserves will have to be replenished. <\/p>\n Donald Trump blamed then-President Joe Biden for selling off some of the US reserves after the Russia-Ukraine war. He promised to pay restitution but has not done so yet. Now the reserves will be reduced to dangerous levels. This means that for legal and security reasons, countries will be forced to gradually replenish strategic oil reserves, regardless of oil prices. <\/p>\n Replenishing strategic reserves will drive up oil prices and prolong the crisis. <\/p>\n risk of new war<\/strong><\/span><\/p>\n }<\/p>\n The Middle East’s image as a reliable source of energy has been tarnished for years. The war is not over yet and tensions remain in the region. This conflict has increased the risk. Insurance and transportation costs have increased. These costs will keep energy prices up for a long time, perhaps permanently. <\/p>\n The U.S. Department of Energy has announced that it will include a permanent risk premium on the price of oil. The problem is not limited to Hormuz. The Red Sea is also in danger. The use of drones and Iranian-backed groups could target other important sea lanes. <\/p>\n The head of the International Energy Agency says that the world has reacted very calmly to this situation. \u2019<\/p>\n The oil crisis of the 1970s led to high prices, falling living standards, and political unrest. This time, things could be worse. Fatih Birol says, “So far, Asia has been the most affected. But the crisis will also spread to Europe and other regions. <\/p>\n “We are entering the biggest energy crisis in history,” Birol warned. \u2013 translated from BBC <\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Kathmandu. The world’s biggest energy crisis has just begun after the US and Israeli attacks on Iran on February 28. Neither a temporary ceasefire nor an end to the Iran war could immediately return the global energy crisis and prices to pre-war levels. The pre-war situation refers to a time when cheap oil and gas […]<\/p>\n","protected":false},"author":16,"featured_media":217841,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[45031,45044,45159],"tags":[],"class_list":["post-295163","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banner-news-en","category-international-news-en","category-news-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/295163","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/comments?post=295163"}],"version-history":[{"count":1,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/295163\/revisions"}],"predecessor-version":[{"id":295164,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/295163\/revisions\/295164"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/media\/217841"}],"wp:attachment":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/media?parent=295163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/categories?post=295163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/tags?post=295163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}