Experts warn Gulf oil crisis will outlast war even if diplomacy succeeds

G7 finance ministers and the International Energy Agency met to address surging oil prices driven by the US-Israel-Iran conflict but ended without an agreement to release strategic crude reserves, as experts warn the energy crisis may be far from over even if diplomacy succeeds.

In a statement following the virtual meeting, the G7 said members "stand ready to take necessary measures, including to support global supply of energy such as stockpile release." IEA head Fatih Birol said global oil markets have deteriorated in recent days, warning that "a substantial amount of oil production has been curtailed and it is creating significant and growing risk for the market."newsonair

Gulf Production Remains Crippled

The scale of the supply disruption is staggering. The IEA's August 12 Oil Market Report found that Gulf oil production, while recovering, remains 8.3 million barrels per day below pre-war levels. Global oil supply is 6.3 million bpd below year-earlier levels, according to the agency.wwbl

The U.S. Energy Information Administration assessed production shut-ins at an average 5.5 million bpd in July and expects production to generally return to pre-conflict conditions in early 2027, though some Gulf producers may not regain their previous output during its forecast period.wwbl

Art Berman, a petroleum geologist with more than four decades of industry experience, told Fox News ↘ 2.94% Digital that restoring shut-in wells is far more complicated than reopening the Strait of Hormuz. "This is not like turning on a switch for a light bulb," Berman said. "It's a complicated, high-risk, relatively long-term process, and we don't know the outcome."foxnews

Refining Crisis Deepens

The conflict's impact extends well beyond crude production. European diesel prices have surged more than 70 percent since the war began in late February, while US gasoline prices have climbed around 60 percent. The war knocked out more than 20 percent of the Middle East's 9.6 million bpd of refining capacity, according to the IEA, while Ukrainian strikes have cut Russia's refining throughput by nearly 30 percent.thenews

Global oil stocks fell at a rate of 3.5 million bpd between March and July, and US diesel inventories are at their lowest for this time of year in three decades.thenews

Inflation Pressures Mount

The energy shock is already feeding into consumer prices. US consumer prices rose 3.4 percent in July year-on-year, driven in large part by a 14.7 percent increase in energy costs, while euro-zone inflation accelerated to 2.9 percent led by a 10 percent rise in energy costs.thenews

Reuters columnist Ron Bousso wrote that even a diplomatic breakthrough permanently reopening the Strait of Hormuz "probably would not deliver quick relief in the refined product market," noting that more than 20 Gulf refineries suffered damage during the war and will require extensive repairs.thenews

"The energy crisis that really matters to the global economy is just getting started," Bousso concluded.thenews