The fuel crisis has increased globally due to the Iran-US-Israel war. As per the reports of multiple sources, including the BBC and CNN, the war has led to heavily restricted fuel supplies and reduced its production from the Middle East. The shortage of fuel supplies has led to a drastic rise in fuel prices, roughly twenty percent, in many nations all over the world. Efforts have been going on to resolve the crisis over the Strait of Hormuz. If it is resolved, global oil supplies will increase. But it remains uncertain when and how much the fuel crisis will end and global oil supplies will be stable.
It is difficult to be convinced that the Iran-US-Israel war is going to end soon, though the chance of it remains. The parties, including the US and Iran, have not yet reached any peace deal on the Iran war due to the lack of agreement on several core points and several other reasons. Moreover, sporadic conflicts have been going on, even after reaching a ceasefire, among the parties, including the US and Iran. Even if the assurances are often given to reach a peace deal earlier, there is no such indication on the ground, increasing the uncertainty about ending the war soon and resolving the crisis on the Strait of Hormuz, a vital waterway for supplying a significant portion of global fuels such as crude oil, diesel and natural gas.
The movement of ships, including oil ships, has not yet become normal, though a limited number of ships are passing through the Strait of Hormuz. It now operates under a highly constrained, conditional and permission-based regime, leading to the movement of a very limited number of ships. Moreover, strikes have been reported on oil infrastructure and ships such as oil tankers and commercial ships anew in the last few days. In the latest round of strikes, Oman’s Mina al Fahal crude oil export terminal was hit. Given that the Iran war is not resolved earlier, further strikes on oil infrastructures may not be ruled out at all.
The fuel crisis has led to various impacts all over the world. It spiked food costs, transport costs and inflation and living costs. The crisis has forced many nations to aggressively subsidize energy, leading to national debt, though it fast-tracks renewable energy adoption. Moreover, the fuel crisis has led to macroeconomic slowdown, production delays and rising production costs in different nations, impacting the economy. Several institutions such as the IMF and OECD have cut global growth forecasts, citing inflation and restricted trade as major drags on the world economy. But the disadvantaged bear the most impacts of the fuel crisis. Lower-income households spend more on goods and have limited options to find cheaper alternatives.
But the impacts of the fuel crisis are not evenly seen all over the world. Nations in the Global South, including but not limited to India. the Philippines and Singapore, have been impacted more due to their dependence on Middle East oil and gas. Several Asian countries have been seen mounting budget deficits due to fossil fuel subsidies. The shock prompted the Asian Development Bank to downgrade the region’s growth forecasts, with inflation projections rising to 5.2 percent. Rising transport and agricultural and fertilizer costs pushed up local food prices and impacted poverty reduction gains. But the impacts will be more if the war continues.
Even if a permanent ceasefire in the war is reached and the problem of the Strait of Hormuz is resolved soon, as is frequently being indicated by the US, the fuel crisis will remain for months with the possibility of affecting many countries. This is due to several causes. While prices will initially drop, the supply will remain volatile for several months. The shock has caused severe supply chain and infrastructure damage in the Middle East, including the UAE’s Habshan gas infrastructure and Das Island facility, Qatar’s Ras Laffan facility, and crude oil export terminals and petroleum refinery complexes in several countries, that cannot be resolved overnight.
There can be several other challenges to quickly ensure fuel stability worldwide in different nations. Even with peace restored, getting vessels back into standard rotation will require significant time. To stabilize initial shocks of fuel, countries often rely on released Strategic Petroleum Reserves (SPRs). Once the crisis ends, the ban is withdrawn and ships start to operate through the Strait of Hormuz, there can be increased pressure for fuel in different countries, increasing the price.
But measures are needed to reduce the global fuel crisis and end the Iran-US-Israel war. For this, it is vital to reopen the Strait of Hormuz and reach a permanent ceasefire, even if there is not a permanent peace deal, as early as possible. At least, allowing the safe operation of more oil and gas ships through the Strait of Hormuz will help reduce the war-driven extant fuel crisis globally. But the continuation of the ongoing peace talks will help resolve the Iran war and the problem of the Strait.
Unless a permanent ceasefire is reached on the war soon, the parties should avoid attacking oil and gas infrastructures in the Middle East. This will help refrain from further damage to oil and gas infrastructures. But measures are needed to address the fuel crisis and its related impacts in different nations. The use of other available sources of energy can help address the crisis.
