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Energy Experts: Iran Deal Won't Fix Oil Supply Overnight
15 Jun
Summary
- Iran war end and Strait of Hormuz reopening won't immediately fix prices.
- Supply chain delays mean it will take months for energy needs to be met.
- Some Middle Eastern producers may take up to a year to resume extraction.
An agreement to end the Iran war and reopen the Strait of Hormuz was announced on Sunday, but energy experts warn that this will not swiftly resolve issues of high oil and gasoline prices.
It is projected to take months before energy companies can resume operations to meet global demand. The slow processes of shipping and refining crude oil, coupled with lingering doubts about the safety of transit through the vital waterway, mean immediate relief is unlikely.
Ships carrying crude oil have been stranded for over three months, unable to navigate the Persian Gulf. Experts note that ships must first exit the strait, and new tankers must then be loaded, a process requiring confidence in safety windows and insurance.
Additional delays stem from the time it takes for tankers to travel to refineries and for producers who paused extraction due to storage limitations to restart operations. Some countries, like Saudi Arabia and the UAE, may resume production faster due to alternate routes.
However, regions such as Iraq, which experienced larger production shutdowns, could face challenges, potentially taking about a year to return to previous levels. Investment in the energy sector, which had halted, will also need time to recover and yield results.
