How Global Energy Markets Survived Eight Months of Iran War Disruptions

Detailed summary

Six months into the Iran war, global energy markets have largely overcome severe supply disruptions through alternative sourcing and emergency measures, but at higher costs and with significantly depleted reserves.

Robert Rapier is a chemical engineer in the energy industry. He has 25 years of international engineering experience in the chemical, oil and gas, and…

Six months ago, I wrote that Americans were experiencing the Iran war primarily through higher prices, while much of the rest of the world was confronting something more serious: actual shortages of fuel and other critical products.

In “The U.S. Feels Higher Prices While The World Is Facing Fuel Shortages,” I highlighted several pressure points created by the disruption of traffic through the Strait of Hormuz. India was struggling to secure liquefied petroleum gas, or LPG, fertilizer markets were tightening, Europe faced potential shortages of jet fuel and other refined products, and Asian economies were scrambling to replace energy supplies normally sourced from the Persian Gulf.

At the time, the biggest unknown was how long the disruption would last and how successfully global supply chains could adapt. Six months later, the picture is much clearer. Some of the worst fears did not materialize, but that was largely because countries drew down inventories, rerouted supplies over much longer distances, released emergency stocks, reduced consumption, and paid more to keep products moving. The global energy system proved remarkably adaptable, but much of that adaptation came at a substantial cost.

India provided one of the clearest early examples of a physical shortage. The country traditionally sourced about 90% of its imported LPG from the Middle East, leaving it highly exposed when traffic through Hormuz collapsed. The government reduced LPG allocations to industry to protect household cooking-gas supplies, encouraged some users to switch fuels, and took steps to discourage hoarding as Middle Eastern LPG exports plunged.

India and other Asian buyers eventually found replacement supplies, particularly from the United States. U.S.

The episode demonstrated both the strength and the weakness of global energy trade.

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