IEA Chief: Gulf Energy Crisis is Worse Than 1970s Oil Shocks
Benchmark Brent and WTI oil futures eased on Monday in response to the White House's claims of new peace talks with Iran, but the near-term energy outlook remains challenging, according to some of the world's leading authorities. IEA chief Fatih Birol told a press conference in Australia on Monday that the Strait of Hormuz shutdown is the equivalent of both 1970s oil shocks and the Ukraine-Russia natural gas shock of 2022, all rolled into one.
"This crisis, as things stand, is now two oil crises and one gas crash put all together," Birol told the National Press Club of Australia. He added that he opted to speak because "the depth of the problem was not well appreciated by the decisionmakers around the world."
"Many of us remember the two consecutive oil crises of the 1970s, 1973 and 1979. And each time, the world lost about five million barrels per day. And we know that there were major economic problems around the world, recessions," he said. "And as of today, we have lost 11 million barrels per day."
Birol said that the Strait of Hormuz must be unblocked, urgently, in order to restore supply flows. In the meantime, his agency is encouraging governments to impose energy-conservation rules - like work-from-home mandates and reduced speed limits - and is in talks on the possibility of a second coordinated release from IEA members' strategic oil reserves.
At CERAWeek in Houston, TotalEnergies CEO Patrick Pouyanne said that he expected that there would be serious risks to the global economy if the Hormuz shutdown persists into the fourth quarter. The energy market's difficulties are exacerbated by China's decision to ban exports of refined products, he said. China has abundant oil reserves, having stocked up hundreds of days' of supply before the conflict, but has walled up its internal market to preserve energy price and availability for domestic consumers. Fuel markets in other Asian states with thinner reserves are facing severe stress, and Asian refiners are having difficulty sourcing alternative crudes comparable to the Arabian Gulf grades they need.
"If it’s more than six months, we will have some real impacts. All the economies of the world will be damaged," Pouyanne told CGTN. "If this conflict lasts three, four months, we can swallow it. Today we manage to amortize this shock because we have inventories."
He also predicted that if the conflict drags on, LNG prices would be "very high" by midsummer, the season when Europe refills its inventories ahead of winter. "The consequence is not only high energy prices, it would damage also other economies, for example, supply chain," he said.
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In a research note released Sunday, Goldman Sachs raised its price forecasts for oil to account for a longer conflict. Goldman now predicts average Brent oil prices of $110 over the course of March and April, up nearly two-thirds over the 2025 annual average, and a full-year 2026 average for Brent of $85. In the near term, through April 10, "prices are likely to trend higher over that period until the market gains confidence." High prices could prompt fuel-saving measures to prevent future shortages, the bank predicted, as already seen in multiple Asia-Pacific energy markets.
If the strait remains all but closed for more than 10 weeks, and if Mideast supplies are slow to recover afterwards, prices could spike north of $115 per barrel, Goldman warned.
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