Countries must not hoard fuel during Iran war, warns IEA

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Countries must resist the urge to hoard oil and fuel during the energy crisis triggered by the US-Israeli war on Iran, the head of the International Energy Agency has warned, with supplies expected to dwindle further if the Strait of Hormuz remains closed. 

“I urge all countries not to impose bans or restrictions on exports,” Fatih Birol told the FT. “It is the worst time when you look at the global oil markets. Their trade partners, their allies and their neighbours will suffer as a result.”

While he was careful not to name China directly, Birol’s comments appear to be aimed at Beijing. China is the only major country to have banned the export of petrol, diesel and jet fuel in response to the five-week-old war, although India has imposed extra duties on exports. 

Birol said “major countries in Asia who hold major refineries” should rethink any ban. “If those countries continue to restrict or totally ban exports, the impact on the Asian markets will be dramatic.” 

His plea for countries to avoid bans may also be pointed at the US, where rumours of a potential ban on refined fuel exports are circulating as gasoline prices pass $4 a gallon and California faces the threat of jet fuel shortages. While the US supported a G7 call for no export bans, its energy secretary Chris Wright has so far only ruled out a ban on crude oil exports. 

Birol said some countries are already hoarding energy, undermining the impact of the IEA’s move to release 400mn barrels of crude and fuel from emergency reserves in an effort to stabilise markets during the current conflict. 

“Unfortunately we see that some countries are adding to their existing stocks during our co-ordinated oil stock release,” he said. “They are stocking up. This is not helpful. In my view this is a time for all countries to prove they are a responsible member of the international community.”

Two countries that have seen their stocks rise in recent weeks are the US and China. Despite being the biggest contributor to the IEA plan, US inventories were up 5 per cent year-on-year, according to the latest weekly report from the US Energy Information Administration. 

China’s onshore stockpiles of crude are likely to be nearly 120mn barrels higher in April, at 1.3bn barrels, according to a prediction from energy data company OilX.

The energy crisis has so far been most acutely felt in Asia, where some countries have begun to ration fuel and trim their work weeks.

While prices of diesel and jet fuel in particular have risen sharply in the west, Birol said there were “no physical shortages of jet fuel or diesel in Europe at the moment” but added that the situation may change in the coming weeks if the disruption to flows from the Middle East continues. 

Birol, who as head of the IEA has been at the heart of discussions over how to respond to the crisis, warned that “in April, we will lose twice the amount of crude oil and [refined] products we lost in March” if the Hormuz strait does not reopen to shipping. In normal times, one-fifth of the world’s oil and liquefied natural gas flows through the waterway, which has been all but closed by Iranian threats to fire upon shipping. 

Even after the end of the conflict, it will take a long time to return to normal, he cautioned. 

“We are following all the key energy assets in the region on a daily or hourly basis,” he said, referring to oil and gasfields, pipelines, refineries and LNG terminals. “Currently there are 72 energy assets damaged and one-third are severely or very severely damaged,” he added. 

Birol praised Saudi Arabia for its rapid response to the crisis, after it rerouted over two-thirds of its oil exports through a pipeline to the Red Sea, bypassing the strait.

He said he had been reassured by the “highest authorities in Saudi Arabia” that this key pipeline is “well protected” but noted that if there was a successful attack on the route, “the consequences would be extremely dire” for the global economy. 

Birol also said the current crisis would redraw the world’s energy system, as did previous crises in the 1970s and the one triggered by Russia’s full-scale invasion of Ukraine in 2022. He noted that the 1970s oil shocks had produced a boom in nuclear power, an efficiency leap in car engines, and a fast-tracking of oil and gas licences in the UK North Sea.

He predicted that the current crisis would trigger another nuclear revival, a boom in electric vehicles and a push for more renewables, as well as prompting some countries to burn more coal. 

But he said the gas industry, which had presented itself as a reliable supplier, would have to “work hard to regain its reputation” after two energy shocks in four years.

Birol also warned that the UK would not be able to reproduce its oil boom. “It has already produced most of what can be cost-effectively extracted,” he said. “Back then, the UK produced 5 per cent of global oil and gas. Today it is about 0.7 per cent.”