The International Energy Agency on Monday asserted that the world is facing the worst-ever oil crisis and stressed the situation in the Middle East could lead the situation even more grim if the Strait of Hormuz remained closed. According to the top official of IEA, the current situation is even worse than the 1970 oil crisis and the Russia-Ukraine war.
Addressing a press conference in the Australian national capital, Executive Director Fatih Birol described the crisis in the Middle East as "very severe" and worse than the two oil shocks of the 1970s, as well as the impact of the Russia-Ukraine war on gas, put together.
What is the solution of current global oil crisis?
The war on Iran had taken 11 million barrels of oil per day from the global supply, more than the two prior oil shocks combined. "The single most important solution to this problem is opening the Hormuz Strait," he said. “The depth of the problem was not well appreciated by the decision makers around the world,” he said of his decision to begin speaking publicly three weeks into the war.
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He asserted the urgent need to release more oil from the emergency reserve. According to Birol, the agency is consulting with governments in Asia and Europe on the release of more stockpiled oil "if necessary" due to the Iran war, Executive Director Fatih Birol said on Monday. "If it is necessary, of course, we will do it. We look at the conditions, we will analyse, assess the markets and discuss with our member countries," Birol told the National Press Club in Canberra, at the start of a world tour.
IEA had already released 400 million barrels of oil
It is interesting to recall that IEA member nations agreed on March 11 to release a record 400 million barrels of oil from strategic stockpiles to combat the spike in global crude prices. The drawdown represented 20 per cent of the overall stocks. There would not be a specific crude price level to trigger another release, Birol said.
“A stock release will help to comfort the markets, but this is not the solution. It will only help to reduce the pain in the economy.” The IEA chief began his world tour in Canberra, as the Asia Pacific is at the forefront of the oil crisis, he said, given its reliance on oil and other crucial products like fertiliser and helium transiting the Strait of Hormuz.
Stockpile drawdowns are only a portion of what the IEA could do, he said.
What are the measures to tackle oil crisis?
Measures outlined by the IEA, such as lowering speed limits or implementing work-from-home measures, had reduced energy use when implemented in Europe in 2022, but each nation would need to decide how best to enact fuel savings, Birol said. He said that while Australia’s liquid fuel holdings were lower than IEA regulations, the current government had done much to improve them and that 30 days of diesel was a “solid number.”
(With inputs from Reuters)