Total losses from the US-Iran War still trail 1979 Oil Shock
By Alex Lawler
LONDON, 3 July - According to calculations based upon data from the International Energy Agency, OPEC, and the U.S. Department of Energy, the 1979 Iranian Revolution is the greatest 'oil crisis in terms of cumulative supply losses.
The U.S. and Israeli war against Iran has prompted comparisons to the 1973 Arab oil 'embargo', the Iranian Revolution, and the Gulf War of 1991, while highlighting the evolution of global energy markets.
A DIFFERENT TYPE OF?ENERGY?SHOCK
The Iran War has disrupted the supply of crude oil, natural gases, refined fuels, and fertilisers simultaneously, unlike previous crises. This is due to the globalisation of trade, decades of increasing energy demand and the Middle East becoming a major supplier of finished fuels.
Oil shocks in the 1970s left a lasting impact on economies and changed energy policies of major importers. The IEA was created in response to these crises to provide advice to industrialised countries on energy security, and to coordinate emergency stocks.
In response to the current crisis, the agency released a record number of 400 million barrels of strategic reserves? to help stabilize markets and offset lost Middle Eastern supplies.
How does the current disarray compare in terms of scale?
The IEA reported that peak supply losses were 14 million barrels a day (bpd), which is equivalent to 13.6% of the expected global oil demand for this year, 103.3 million bpd.
According to IEA data, this is a far cry from the peak losses during the Arab oil embargo of 1973-74, 5.6 millions bpd in the Iranian Revolution, and 4.3?million bpd in the Gulf War of 1991.
Qatar has also been unable to produce a fifth of the world's liquefied gas due to the conflict. Qatar began exporting LNG in 1996, after the oil crisis of the 1970s.
After Gulf refinery failures contributed to diesel and jet fuel shortages, the disruption went beyond crude and natural gas. The large refineries that have been built across the Gulf in recent decades are now major suppliers of fuel to Africa, Europe and Asia. Argus Media estimated that the conflict had a negative impact on the supply of LNG from Qatar and the United Arab Emirates by around 24 million metric tonnes. According to IEA data, global LNG trade is expected to reach 428 million tonnes in 2025. This equates roughly 5.6% of the annual global LNG supply.
How do the duration and losses compare with past shocks?
A report by the IEA published on May 13 stated that cumulative losses in Gulf oil production had already surpassed 1 billion barrels. Calculations suggest that the war removed 1.5 billion barrels of oil from the market. This is based on the 14 million bpd additional loss between May 14th and June 17th, when the U.S. Iran interim agreement was signed.
The disruptions will continue for several months, and in the case gas, possibly even years.
The Iranian Revolution caused smaller daily losses but had a greater cumulative impact than the current crisis.
According to the U.S. Department of Energy, Iran's crude oil production dropped by 3.9 million barrels per day (bpd) on average between 1978 and 1981. Calculations show that Iran lost a total of 4.3 billion barrels in three years. However, some of this lost production was offset by higher output elsewhere in Gulf.
Ian Seymour, an oil journalist and author who published a book in 1980, estimated that Iran produced 3.1 million barrels per day on average in 1979. This compares to 6 million barrels per day before the revolution. This implies a loss of over 1 billion in just one year.
OPEC data shows that production fell to an average of 1,47 million bpd by 1980. Calculations show that compared to 1978 production levels the cumulative losses between 1979 and 1980 were more than 2.7 billion barrels. This is still higher than the losses so far recorded in the current crisis.
During the 1973-74 Arab Oil Embargo, producers increased their cuts over a period of three months to 4.5 millions bpd. Calculations suggest that the embargo removed approximately 530-650 millions barrels from market. This is significantly less than what's happening now.
According to a document published by Australia, a member of the IEA, the 1991 Gulf War caused oil production to be disrupted for four months. According to calculations, assuming losses averaged around 4.3 million bpd the cumulative losses would total approximately 516 million barrels. This is also less than what we are experiencing now. (Reporting and editing by Dmitry Zhdannikov, Emelia Sithole Matarise and Alex Lawler)
(source: Reuters)
