TOKYO — At the start of the war in the Middle East, industry officials and experts warned that the closure of one of the world’s most important shipping routes would trigger acute shortages of oil, gas and other essential commodities. Three months after the Strait of Hormuz was blocked, these warnings are coming true in many parts of the world.
Before the war, about a quarter of the world’s seaborne crude oil and a fifth of its liquefied natural gas passed through the strait. The region is also among the world’s largest suppliers of oil and gas products, including fertilizers and naphtha, a liquid used in everything from plastic films to industrial paints.
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Much of the world has felt the crisis mainly through price shocks. Physical supply shortages have hit economies across Asia.
Developing countries in several regions, especially in Asia, were the most affected, as the lack of oil, gas and their derivatives has hampered activities ranging from agriculture and cooking to imaging exams in the health sector.
Governments across the region began to ration energy, use emergency stocks and hastily seek alternative suppliers.
“This is not just a price shock, but an explicit shortage,” said Krishna Srinivasan, director of the International Monetary Fund. “In a context of scarcity, industry reduces production, people lose their jobs, and this has a secondary impact on growth,” said Srinivasan.
Below is the status of the main energy and commodity bottlenecks affecting Asia and the rest of the world.
Oil and liquefied natural gas: countries resort to reserves and impose blackouts
The first, most visible impacts hit crude oil and liquefied natural gas. Both depend on passage through the Strait of Hormuz from major producers such as Kuwait and Qatar, with most cargo going to Asian buyers.
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Japan, which typically gets more than 90% of its oil from the region, saw crude imports plummet 67% in April.
Singapore, which generates 95% of its electricity from natural gas and relies on Qatar for about a quarter of its liquefied natural gas imports, has issued broad energy-saving guidelines for commercial districts.
While richer countries such as Japan, Singapore and China can draw on strategic reserves and outperform competitors in purchasing alternative gas supplies, developing economies have faced the most severe disruptions.
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The shortage of gas for power generation and refined oil into diesel and gasoline has forced governments to reduce consumption.
In Bangladesh, faced with a lack of affordable natural gas, the government imposed large-scale rotating blackouts.
Vietnam implemented mandatory energy rationing in industrial hubs.
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The Philippines declared a state of emergency in late March, reducing government operations to shortened work weeks and limiting the use of air conditioning in public buildings.
Helium is missing for technology and health companies
The war also shook the markets for products extracted from natural gas. Among the most critical is helium, an odorless element made as a byproduct of natural gas extraction. Before the war, Qatar supplied about a third of the world’s helium.
Chip manufacturers use the gas to cool machines that engrave circuits on silicon wafers. Pharmaceutical companies depend on it for quality testing of their products. In MRI machines, helium cools superconducting magnets.
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Richard Brook, CEO of Garrison Ventures, a helium consultancy, said that with Qatari supplies tight and Russian shipments weakened, available helium will likely go primarily to manufacturers willing to pay top dollar — especially semiconductor giants in South Korea and Taiwan, as well as healthcare companies in the United States.
This leaves disadvantaged buyers facing shortages. In India, helium prices have already doubled, said Pavan Choudary, president of the Indian Medical Technology Association.
According to him, the shortage represents a serious threat to small rural hospital networks just when the country was “expanding quality imaging exams to districts that never had access to them”.
Fertilizers: planting in depleted soils as prices soar
The Persian Gulf is also a vital source of fertilizer, making war a threat to the global food supply. Five major exporters — Iran, Saudi Arabia, Qatar, the United Arab Emirates and Bahrain — together supply more than a third of the world’s stocks of urea, the main form of nitrogen fertilizer.
In the first weeks of the war, the closure of the strait left raw materials for fertilizer stranded in the Persian Gulf. Since then, damaged or idled production facilities have caused shortages of essential components, raising prices and reducing fertilizer production.
Urea prices have risen 80% since February, according to World Bank data. US agricultural giant Mosaic Co. recently cited sharply rising sulfur costs as one of the factors behind its decision to reduce phosphate fertilizer production at plants in the United States and Brazil.
The Food and Agriculture Organization of the United Nations has identified South Asia as a region at “extreme risk”.
Farmers in countries like Pakistan and Bangladesh — unable to compete with richer countries to purchase alternative feeds — have been forced to plant crops in depleted soils.
Also at risk are small farmers in Africa, responsible for producing 70% of the food consumed in Sub-Saharan Africa, according to the African Development Bank.
NAFTA: approaching the “red zone” of scarcity
The oil shortage has spread to refined products such as naphtha, a petroleum derivative so widely used in industry that it is often called the “flour” of manufacturing.
The shortage of the product has been especially severe in East Asia. Japan and South Korea rely heavily on imports from Qatar and Kuwait, which are unable to export due to the closure of the Strait of Hormuz.
Even the naphtha processed in Asian refineries is often produced from crude oil transported across the straits.
In Japan, shortages hit the printing sector, leading major consumer brands, such as snack maker Calbee, to remove colors from their packaging to save on naphtha-based inks.
In South Korea, large producers have reduced production of naphtha-derived chemicals used in plastics.
Experts including Haruhiko Sakaino, a former oil refining chief and adviser to Japan’s Natural Resources and Energy Agency, said the number of Japanese companies entering the “red zone” of production disruptions is likely to rise sharply this month.
Cooking gas: rationing in restaurants so families can cook
The Middle East is one of the world’s leading exporters of liquefied petroleum gas (LPG), a mixture of propane and butane widely used for cooking and heating homes in developing countries. The fuel is produced both by refining crude oil and from natural gas streams.
Since the start of the war, India has become the epicenter of the fuel supply crisis. The world’s second largest importer of LPG, behind only China, India depends on external suppliers for more than half of the 31 million metric tons it consumes annually. Historically, most of these cargoes passed through the strait.
Even as the government seeks alternative suppliers outside the Middle East, quotas allocated to the commercial sector have fallen to about 70% of pre-war levels, India’s Ministry of Petroleum and Natural Gas said on Monday.
Aviation fuel: higher prices attract new suppliers
Europe has been at the forefront of concerns about a possible jet fuel shortage. This is because the region is the largest buyer of jet fuel transported through the strait.
So far, the region has not run out of jet fuel because rising prices have encouraged the United States and other major suppliers to redirect cargo to European buyers. High prices also prompted European refiners to increase production.
Still, those same high costs have forced major airlines, including Lufthansa and KLM, to reduce flights. More expensive fares also discouraged some travelers. As a result, European air traffic is about 5% below what it would be under normal conditions, estimates the International Energy Agency.
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