In an interview with Turkish newspaper Oksijen, Fatih Birol, executive director of the International Energy Agency (IEA), stated that developments in global energy markets following the closure of the Strait of Hormuz could represent not only a short-term supply shock but also the beginning of a structural transformation in the energy system.
Comparing the current crisis to the oil shocks of the 1970s, Mr. Birol noted that a process with similar economic and social impacts on the global economy may be unfolding.
He added that, even if the Strait of Hormuz reopens, it will be difficult for energy supply to return to normal in the short term, as damaged refineries, production facilities and liquefied natural gas terminals will take time to resume operations. “Even if the strait were to reopen tomorrow, it would not be correct to assume that we have reached the end of the tunnel,” Birol said, indicating that market impacts may persist in the medium term.
Sharp contraction expected in oil and gas supply
The continued closure of the Strait of Hormuz could have more severe consequences, particularly in April. Birol noted that shipments of oil and natural gas loaded before the war temporarily supported the market in March, but supply is now rapidly tightening due to the inability to make new shipments. This is expected to lead to a significant loss in global oil and gas supply, increasing upward pressure on prices. Disruptions in Middle Eastern supply are creating a serious imbalance in the market.
While the first effects of the crisis have been felt in Asian markets, it is noted that, after countries such as India, Japan, and Australia, Europe is also likely to face supply shortages. Europe’s dependence on the spot market for liquefied natural gas imports is increasing competition with Asia, driving prices higher. According to Birol, this is expected to raise energy costs in Europe and exert downward pressure on economic growth.
Four major transformations in the energy system
The crisis is expected to lead to structural changes in the energy system in the medium and long term. In this context:
- Acceleration of renewable energy investments,
- Increase in nuclear energy projects,
- Expansion of electric vehicle usage,
- Temporary return to coal in some countries are expected to come to the forefront.
Risks and limited advantages for Turkey
Turkey is considered to be relatively better prepared on the natural gas side thanks to its strong infrastructure and storage capacity. However, as oil prices are tied to global markets, cost pressures may increase.
On the other hand, since Europe and the Middle East are among Turkey’s key trading partners, economic contraction in these regions may have indirect effects on the Turkish economy, Birol stated.