March 13 (Reuters) – The International Energy Agency said the closure of the Strait of Hormuz has triggered the largest disruption to global oil markets in history, with supply expected to fall by about 8 million barrels per day in March, or around 8%.
The agency’s member countries responded by agreeing to release a record 400 million barrels from strategic stockpiles to stabilise oil prices and compensate for the loss of Middle East output.
Here is a list of some of the previous disruptions to oil supplies:
THE 1973–1974 ARAB OIL EMBARGO
The Arab oil embargo was triggered by the Yom Kippur War, which began on October 6, 1973, when Egypt and Syria launched coordinated attacks on Israel.
Arab producers acting through the Organization of Arab Petroleum Exporting Countries ordered an immediate 5% production cut, followed by additional 5% monthly reductions. The action was taken to pressure Western nations to force Israel to withdraw from Arab territories it had occupied since the 1967 Six-Day War.
Declassified U.S. National Security Council documents prepared for President Richard Nixon estimated the embargo would leave the United States short by 2–3 million barrels per day, with the total shortage across embargoed nations reaching around 4.5 million bpd.
OAPEC announced the embargo on October 17, 1973, and it remained in place against the U.S. until March 1974, according to U.S. government records.
Crude prices nearly quadrupled as a result from about $2.90 per barrel before the embargo to $11.65 by January 1974. The U.S. government prepared fuel rationing plans, ordered industries to switch from oil to coal, pushed for greater domestic production and advanced emergency energy legislation. The crisis also led oil-consuming nations to establish the International Energy Agency in 1974 to coordinate responses to supply disruptions.
THE 1978–1979 IRANIAN REVOLUTION
Political upheaval in Iran led to the collapse of Shah Mohammad Reza Pahlavi’s government and the rise of Ayatollah Khomeini. Iranian oil production fell sharply by 4.8 million bpd, equivalent to about 7% of global supply, by January 1979.
Oil prices began to rise rapidly in mid-1979 and more than doubled between April 1979 and April 1980, driven by fears of further disruptions, speculative hoarding and strong global demand.
The crisis contributed to rising inflation in the U.S. In August 1979, Paul Volcker was appointed chairman of the Federal Reserve and the central bank adopted aggressive monetary tightening to curb inflation. The policies broke the cycle of stagflation but, combined with the oil shock, pushed the U.S. economy into a severe recession.
THE 1990–1991 GULF CRISIS
Iraq’s invasion of Kuwait and the subsequent United Nations embargo on Iraqi and Kuwaiti oil removed about 4.3 million bpd from global markets.
Before the war, Iraq produced about 3.1 million bpd and exported 2.7 million bpd, while Kuwait produced about 1.8 million bpd and exported 1.7 million bpd, together accounting for nearly a third of Gulf oil output and exports.
Oil prices surged, with Brent crude rising from about $17 per barrel in July 1990 to around $36 by October 1990, before easing again after the war ended in February 1991.
The IEA activated its Co-ordinated Energy Emergency Response Contingency Plan, preparing to make 2.5 million bpd available to markets within 15 days, including 2 million bpd from emergency stock releases, 400,000 bpd from demand restraint measures and 100,000 bpd from fuel switching and spare production capacity.
HURRICANES KATRINA AND RITA IN 2005
Hurricane Katrina struck the U.S. Gulf Coast in August 2005, shutting in large volumes of offshore production. At the peak of the disruption on August 29, 2005, about 1.38 million barrels per day of oil production was shut in, according to U.S. government data. Production losses gradually declined but were still around 840,000 bpd by September 16, 2005.
Hurricane Rita followed in September, with combined storm disruptions shutting in up to 1.53 million bpd at the peak on September 26, 2005.
The U.S. Department of Energy loaned 9.1 million barrels of crude from the Strategic Petroleum Reserve to refineries. The U.S. also participated in a 30 million barrel coordinated stock release with the International Energy Agency.
Regulators issued emergency waivers allowing the use of winter-blend gasoline, higher sulfur diesel fuel and temporarily waived the Jones Act to allow foreign vessels to transport fuel between U.S. ports to ease supply bottlenecks.
2022 RUSSIAN INVASION OF UKRAINE
Russia’s full-scale invasion of Ukraine in 2022 triggered a global energy crisis as European countries scrambled to reduce their dependence on Russian oil and gas.
Prices spiked over 50% within a few weeks, with crude reaching some of the highest levels since 2008 due to the search for alternative supplies.
In March 2022, then-President Joe Biden ordered the release of 180 million barrels over six months to combat the spike.
The U.S. and other Western nations also imposed price caps on Russian oil exports, seeking to reduce Russian funding for the war without taking its oil off the market.
(Reporting by Anushree Mukherjee and Anmol Choubey in Bengaluru; Editing by Sharon Singleton)
Comments