The head of the International Energy Agency, Fatih Birol, pointed out that the market is currently underestimating the effects of the blocked Strait of Hormuz, through which no new tankers passed in March. If the key artery remains closed, the world must brace for drastic price hikes, with the agency already considering releasing emergency strategic stocks.
It will take about two years to restore the original production of energy resources in the Middle East, which was reduced by the conflict in the region, the head of the International Energy Agency (IEA) Fatih Birol said in an interview with the Neue Zürcher Zeitung on Friday. TASR informs about it based on a Reuters report.
- The restoration of the pre-war volume of energy production in the Middle East will take approximately two years.
- Iraq will take significantly longer to restore production than Saudi Arabia.
- The market is currently underestimating the consequences of the long-term closure of the strategic Strait of Hormuz.
- If the Strait of Hormuz remains closed, energy prices will rise significantly.
Risks of a closed Hormuz
“It will vary from country to country. In Iraq, for example, it will take much longer than in Saudi Arabia. But we estimate that it will take about two years in total to reach pre-war conditions again,” Birol told the Swiss daily. According to him, the market underestimates the consequences of the long-term closure of the Strait of Hormuz.
The supplies of oil and gas, which were on their way even before the start of the war in Iran, have already arrived, which will ease their shortage, Birol clarified. “However, no new tankers were loaded in March. No new stocks of oil, gas or fuels were delivered to the Asian markets. This gap is now becoming obvious. If the Strait of Hormuz is not opened again, we must prepare for significantly higher energy prices,” stated the head of the IAE.
“The agency is ready to act immediately and decisively,” Birol said when asked if the IEA could release more emergency supplies, Reuters writes. “We haven’t decided on that yet, but we’re definitely considering it,” Birol said.
