Energy watchman warns oil crisis prompted by US-Israel-Iran war ‘worse’ than recession-inducing 1970s shocks

The world’s energy watchman has warned the oil and gas crisis prompted by the US-Israel-Iran war is worse than the energy shocks of the 1970s “which led the world to recession”.

International Energy Agency boss Fatih Birol has labelled the scale of the situation as equivalent to “two oil crises and one gas crash put together”.

Speaking at the National Press Club in a rare Australian visit on Monday, Dr Birol warned it was a “major threat” if the Strait of Hormuz wasn’t opened “as soon as possible” and admitted he didn’t believe governments appreciated the seriousness of the crisis.

“The amount of oil being lost is equal to two oil crash shocks in the 70s, which led the world to recession,” he said.

He highlighted that the 1973 and 1979 shocks combined only removed about 10 million barrels per day, whereas the current situation has now removed 11 million barrels per day.

“Many of us remember the two consecutive oil crises in the 1970s — in 1973 and 1979,” he said.

“At that time, in each of the crises, the world has lost about five million barrels per day, both of them together, 10 million barrels per day. After that, we all know that there were major economic problems.

“As of today, we lost 11 million barrels per day. So, more than two major oil shocks put together.”

He said it was on top of the 140 billion cubic metres of national gas which has vanished from the global market — up from 75 BCM in the wake of Russia’s illegal invasion of Ukraine in 2022.

Dr Birol said he had initially not engaged in media appearances after the US and Israel strikes on Iran but decided to speak publicly as implications from the de facto closure of the Strait of Hormuz escalated.

“I thought I should say a few things because I thought the depth of the problem was not well appreciated by the decision makers,” he said.

Dr Birol also warned the war-prompted energy crisis could rapidly transform into a global food security crisis as fertiliser prices skyrocket and supply chains collapse.

“It’s not only oil and gas, all these petrochemical products, the sulphur, many different fertilisers — very Important fertilisers — if it’s prolonged, we may well have implications for the agriculture sector and food prices,” he said.

The International Energy Agency on Friday suggested a string of drastic demand-side measures for consumers to take if the energy chokehold in the Strait of Hormuz isn’t alleviated.

Their report identified ten measures that can be implemented swiftly by governments, businesses and households to ease the burden.

It include mass working from home, avoiding air-travel, reducing highway speeds by at least 10km/h and registration plate rotation schemes to limit the days motorists drive.

Dr Birol said the IEA was talking to nations with refineries and encouraging them to ramp up production.

“We are incentivising many countries with refineries to move faster than they normally do,” he said.

“I can give you two examples. One of them is Canada. They postponed some of the maintenance work and increased their production.

“The other one is Mexico which is also moving in that direction.”

He said there was a growing problem in Asian countries and said some would be disproportionately impacted over others.

“The countries who will suffer the most from this will be the emerging and developing countries who import energy because the financial muscles are much weaker. Their currencies are weaker,” he said.

Dr Birol also wanted issues with jet fuel and diesel would be an increasingly mentioned issue in “Europe and beyond”.