Global Energy Crisis ‘Very Grave’ – Worse Than 1970s Oil Shocks, Warns IEA Chief

The global energy crisis is “very severe” and poses a “very, very grave threat” to the world economy, according to Fatih Birol, Executive Director of the International Energy Agency (IEA). Birol’s assessment, delivered Monday at the National Press Club of Australia, characterizes the current situation as exceeding the impact of the oil crises of 1973 and 1979, which collectively removed approximately 10 million barrels of oil per day from global markets.

The disruption extends beyond oil and gas, impacting critical sectors like petrochemicals, fertilizers, sulfur, and helium, with trade flows impeded, Birol stated. He identified Asia as particularly vulnerable, citing its reliance on the Strait of Hormuz, a key maritime route that Iran has effectively closed.

“The most important solution to this problem is the opening of trade in the Strait of Hormuz,” Birol said.

The IEA is actively engaging with oil-producing nations, including Canada and Mexico, to increase production and supply to the global market. Birol also noted that the agency is encouraging countries with refining capacity to accelerate operations. “We have stocks and we are incentivizing many countries with refineries to act faster than normal,” he explained.

Attacks on Qatari natural gas infrastructure by Iranian missiles have halted liquefied natural gas (LNG) exports, and while Australia could potentially offset some of the shortfall, it cannot do so independently, Birol cautioned. “Australia alone will not be able to compensate for the total shortfall of LNG from the Middle East, but there will be fresh LNG facilities coming to market from Australia and elsewhere,” he said.

Following a historic release of 400 million barrels of oil from IEA reserves intended to stabilize markets, Birol indicated the possibility of further releases if necessary. “If needed, You can inject more oil into the markets, both crude and products,” he stated. “The release of reserves will help to calm the markets, but it is not the solution. It will only help to mitigate the impact on the economy.”

Birol reported significant damage to energy infrastructure across the region, with at least 44 facilities in nine countries sustaining severe or very severe damage. He suggested that energy rationing and conservation measures, similar to those implemented during the COVID-19 pandemic, may become necessary, disproportionately affecting poorer nations.

The IEA is currently in consultation with governments worldwide regarding potential further action, but no specific plans beyond the existing reserve releases have been publicly announced.