World faces historic loss of oil supply - Due to war with Iran, dwindling reserves bring risks
The world has comfortably weathered the loss of over a billion barrels of oil supplies since the start of the war, but, with long-term peace elusive and reserves depleted, it still faces the risk of future price increases. Tehran’s closure of the Strait of Hormuz in response to US and Israeli attacks launched on February 28 fueled fears of a catastrophic global energy crisis. The four-month conflict that followed, according to the International Energy Agency, created the largest energy blackout in history. At its worst, the main supply loss was 14 million barrels per day.
But concerns that Asia and Europe would run out of gasoline, diesel or jet fuel never materialized. And after peaking at around $126 a barrel in April, still about $20 below the 2008 record, Brent crude prices are now lower than they were when the conflict began.
"This suggests that traders viewed the disruption as serious but manageable, reflecting confidence in today's more resilient energy systems and economies," said John Baffes, senior economist at the World Bank.
Since the oil crisis of the 1970s, World Bank data show that oil intensity has fallen by more than half in most advanced economies and by nearly 20% in developing and emerging countries. However, beyond this structural change, three specific factors were responsible for preventing the worst-case scenario during the Gulf crisis.
Saudi Arabia and the United Arab Emirates found alternative routes to export. Asia, led by China, limited purchases. And countries around the world are likely to withdraw about 1 billion barrels of oil from their reserves. When the war broke out, China had nearly 1.4 billion barrels of oil in storage, according to the U.S. Energy Information Administration. That was more than the 1.2 billion barrels held by all 32 members of the International Energy Agency, including the United States’ 413 million barrels.
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