HOUSTON — The CEOs of the world’s most influential oil and gas companies delivered a sobering message this week about the impact of the Iran war on energy supplies and the long-term consequences for the global economy.
The executives gathered in Houston, Texas, for S&P Global’s annual CERAWeek energy conference to take stock of the war. They warned that the market is not reflecting the scale of the disruption to oil and gas supplies.
Asia and Europe will face fuel shortages if the war drags on, the executives said. Oil prices are likely to remain high even if the conflict ends as countries restock depleted reserves, they said.
“You just can’t take 8 to 10 million barrels a day of oil and 20 or so percent of the [liquefied natural gas] market off the world stage without having some significant repercussions,” ConocoPhillips CEO Ryan Lance told CERAWeek attendees.
Iran has basically imposed an economic blockade against the oil producers in the Middle East by closing the Strait of Hormuz, said Sheikh Nawaf al-Sabah, the CEO of Kuwait Petroleum Corporation. The Strait is the vital artery that connects the Gulf Arab producers’ oil exports to global markets.
“This is an attack not only against the Gulf, but it is an attack that is holding the world’s economy hostage,” al-Sabah told conference. The CEO warned that the war will have a “domino effect” across the global economy.
“The costs of this war don’t stay within geographical lines in this region,” al-Sabah said. “They extend all the way through supply chain.”
The oil shock is the worst since the Arab oil embargo against the U.S. and other Western nations over their support for Israel in 1973 Mideast war, said Paul Sankey, an independent analyst at Sankey Research.
“This is the worst I’ve seen,” said Sankey, who started his career at the International Energy Agency in 1990. “We’ve seen nothing like this, possibly since 1973. We’ve never seen the Straits of Hormuz shut.”
“We’re in a de-facto situation where the Iranians are controlling the Strait,” Sankey said. “So the situation is extremely grave.”
Call for U.S. military to protect energy
The executives comments stood in contrast to the Trump administration’s efforts to reassure a worried industry and volatile oil market.
Energy Secretary Chris Wright told CNBC the market is facing a “short-term period of disruption.” The price is worth paying in order to acheive the long-term benefits of defanging Iran, he said.
But the price is very high for an oil and gas industry whose assets are now exposed to attack. Conoco is “pleading” with Trump administration for military “protection around the US-owned assets in Qatar and hundreds of millions of dollars of investment,” Lance said.
Iran has forced the closure of the world’s largest liquefied natural gas hub in Qatar with drone attacks. Conoco is a major investor in that facility.
“We’ve had to evacuate a number of our staff, our non-essential staff,” Lance said. “That’s been a been a chore over the last…
Read More: How the big oil and gas CEOs think the Iran war supply disruption will play
