The most recent conflict between the United States and the Middle East has left the UK not only concerned about the US’s relationship with Iran, but also with Russia, while also creating problems for UK gas prices in its wake.
The fighting between Iran and the US and Israel has left key oil sites decimated by missiles and an international panic over the rocketing prices of oil. It is often forgotten that the energy industry suffers when wars go on in the Middle East and the effect from the price of war and the affect on the price of oil.
The Trump administration decided to ease sanctions against Russian oil earlier this month, marking a distinct change from the tariffs which have been in place during the war in Kyiv. However, there has been consideration that the move to bring Russian oil back onto the market might improve the situation but not in a way that will likely impact on the long term according to some experts. In recent days, the energy suppliers have said that an increase in energy prices is ‘inescapable’ if the oil prices stay high. The current Iran war has left the Strait of Hormuz effectively closed, severely impacting the supply of oil and prices as a consequence with the strait carrying a fifth of global oil supplies.
With the Gulf region out of commission, Asia especially is feeling the effects of the war with 90% of their oil and gas coming through the Strait. This effect is important because the oil refineries in South East Asia are designed for the type of oil which comes from this region (heavy or medium sour). Nakano, a senior fellow in the Energy Security and Climate Change Program at the Centre for Strategic International Studies, said that this element means that it would take “significant investment” to alter the refinery specifications.
Furthermore, the cost of imports has risen due to the price of fuel, leaving countries like the Philippines, Singapore, and Vietnam all vulnerable to the ripple effects to the Iran war. China is better placed to not be so affected by the conflict, but time will tell if this lasts. While gas prices are matching 2002 rises, the US is managing to stay protected from some of the worst of it with internal fracking operations ‘insulating’ it from the issues the administration is creating internationally.
Finally, it must be mentioned the effect this has for the climate, as when talking about fossil fuels, you have to remember their impact on the world beyond politics. Returning to South Asia, India is facing a return to more harmful fuels such as wood and dung. The environment ministry has advised state pollution boards to allow this switch for essential sectors. However, while this may allow their economy to weather the storm, these fuels have had proven links to serious heart and lung disease that are worse for indoor air pollution. There is hope that solar cooking systems might reduce the dependence on fossil fuels for household energy needs.
All of these international concerns will be decided in time, but for now it will be a waiting game to see the effects this war will have on the gas, energy, and climate sectors in the coming months.
