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IEA chief Fatih Birol said the world is quickly running out of the buffers that have prevented a sharper oil shock from the “largest energy crisis in history” in West Asia.
Executive Director of the International Energy Agency (IEA) Fatih Birol. (Reuters)
With commercial shipping through the vital Strait of Hormuz disrupted due to the US-Iran war, the International Energy Agency (IEA) has sounded an alarm over the global economy entering a “red zone” if such disruptions persist beyond June.
IEA Executive Director Fatih Birol told CNBC-TV18 that the world is quickly running out of the buffers that have prevented a sharper oil shock from the ongoing conflict. He described the current situation as the largest energy crisis in history, resulting in the loss of a huge amount of oil and natural gas, which would have major implications for the global economy.
“The inventories, the stocks, the money in the pocket is diminishing, and new money is not coming in. We are coming at the bottom of those, and as I said, if we are not able to see a fully and unconditional opening of Strait of Hormuz by end of June, July, and August, the travel season around the world in many countries are starting the flights and the cars and the buses, we may be entering the ‘red zone’ for the global economy, especially those in Asia,” he said.
He also warned that markets will be in a volatile phase for some time, even if an agreement is reached between the US and Iran and the Strait of Hormuz is reopened.
“We are also likely to see upward pressure on inflation in several countries, particularly where currencies are not very strong. Looking at the next few weeks and months, I believe this will be a transitional period. It will not be easy to restore all the Middle East oil supplies, considering that the region exports more than 20% of the world’s oil,” he added.
Will IEA Release Second Tranche Of Oil?
All 32 member countries of the IEA agreed in March to release 400 million barrels of oil from their emergency reserves available to the market to address disruptions in oil markets stemming from the war in West Asia.
“We saw that as soon as the markets learned that this oil was coming to help calm conditions, prices went down by about $20 per barrel. It provided relief, it was very effective, and it was a unanimous decision of our member countries and many countries that are in the accession process to become full IEA members, such as India, also gave strong support,” Birol told CNBC-TV18.
He said the IEA will continue to assess market conditions, but highlighted that disruption is yet to reach a stage for a second tranche of oil supply. “If we believe it is the right time, we will definitely go for it. But at the moment, we are not there.”
About the Author
Aveek Banerjee is a Senior Sub Editor at News18. Based in Noida with a Master’s in Global Studies, Aveek has more than three years of experience in digital media and news curation, specialising in int…Read More
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