World in energy crisis worse than 1970s oil shocks combined, says IEA chief

The energy crisis caused by the war in Iran represents a “major threat” to the global economy, says Fatih Birol.

Speaking at a media event in Australia on Monday, IEA Executive Director Fatih Birol said the energy crisis caused by the US-Israel war against Iran has exceeded the oil shocks of 1973 and 1979 and the gas shortages resulting from Russia's invasion of Ukraine in 2022 combined.

“This crisis, as things stand, is now two oil crises and one gas crisis rolled into one,” Birol told Australia’s National Press Club in Canberra.

Birol said the effective closure of the Strait of Hormuz and attacks on energy facilities have reduced global oil supply by about 11 million barrels per day (bpd), more than double the combined shortfalls of the 1970s crises.

He said liquefied natural gas (LNG) supply has been reduced by about 140 billion cubic metres, compared with a shortfall of 75 billion cubic metres following Russia's invasion of Ukraine.

At least 40 energy facilities in nine countries have also been severely damaged in the conflict, the IEA chief said.

“The global economy faces a major threat today and I sincerely hope this issue is resolved as quickly as possible,” Birol said.

Birol also expressed concern that the scale of the crisis had not been fully understood earlier, explaining his decision to speak publicly about the situation for the first time last week.

On Friday, the Paris-based intergovernmental organisation, which earlier this month announced plans to coordinate the release of 400 million barrels of oil from emergency reserves, proposed a series of measures governments could take to reduce energy consumption.

The proposed measures include facilitating remote working and car-sharing and reducing speed limits on motorways.

“I thought the depth of the problem was not well appreciated by decision-makers around the world,” Birol said.

The IEA chief said he was in consultation with different countries about releasing more strategic oil reserves if needed, but the “most important solution” to the crisis was to unblock the strait, which normally carries about a fifth of global oil and LNG supplies.

Oil prices have surged more than 50 per cent since the start of the war, which began with US-Israel attacks on February 28, amid Iran’s effective blockade of the vital waterway.

US President Donald Trump issued Iran on Saturday with a 48-hour ultimatum to unblock the strait or face the destruction of its power plants, the deadline for which expires on Monday night in the United States.

Iran has threatened to completely close the waterway, which has been transited by a small number of ships not aligned with the US or Israel, and launch attacks on energy and water infrastructure across the region if the US attacks its power plants.