Kathmandu— In March, when the Trump administration and the Israeli government initiated an attack on Iran, analysts foresaw potential energy disruptions due to the partial blockade of the Strait of Hormuz. The blockade affected over 10 million barrels of oil per day and 20 percent of global liquefied natural gas (LNG) supply, causing the greatest energy supply disruption in history. Despite initial predictions that oil could reach $200 a barrel, prices peaked at $103.90 sixteen days into the conflict and have since stabilized.
Impact on Global Markets
The blockade has had significant local effects, particularly on poorer Asian countries. Diesel fuel prices are nearing record highs, and disruptions in fertilizer supply could lead to increased food prices in coming months. However, the disruption did not result in skyrocketing oil prices as previously predicted.
Mitigation Strategies
Several practical measures helped mitigate the worst effects of the blockade. Saudi Aramco maximized its East-West pipeline and Red Sea routes to bypass Hormuz, while some tankers managed to avoid Iranian drones with U.S. Navy escort. Countries like South Korea switched from Saudi oil to Canadian sources, and India increased imports of Russian oil. The U.S. and Japan drew down their Strategic Petroleum Reserves.
China's Role
China, the world’s largest importer of oil, reduced its Iranian oil imports by half before the war. China has a significant Strategic Petroleum Reserve (SPR) that contributed to this reduction. Additionally, much of China’s petrochemical industry is based on coal, which accounts for about 10-12 percent of global oil demand.
Renewable Energy Growth
The doomsday forecast being wrong suggests that oil's significance is diminishing in favor of alternative energy sources. Countries like Australia, Pakistan, China, Iceland, Spain, and Denmark have built flexibility through renewables. Solar energy has rapidly expanded globally, with solar meeting 75 percent of the increase in global electricity demand.
(With inputs from CounterPunch)
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Originally published on abcnews.com.np.
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