Agadir – The International Energy Agency (IEA) has identified a series of demand-side measures that can ease the pressures on the prices of crude oil resulting from the disruptions in the gulf region.
The war has resulted in “the largest supply disruption in the history of the global oil market,” the IEA said in a statement, noting that the flow of oil through the Strait of Hormuz, which normally carries 20% of the world’s oil consumption, has reduced to a trickle.
It explained that 20 million barrels a day of crude oil and products move through the Strait, and their loss is a major factor in the current tightness in the oil market.
Oil prices have risen above $100 a barrel, with even higher increases in refined oil products such as diesel, jet fuel, and Liquefied Petroleum Gas (LPG).
The IEA pointed out that although the restoration of the flow through the Strait is vital in stabilising the global energy markets, efforts on the supply and demand sides are being mobilised to address the crisis.
IEA Member countries agreed on March 11 to release 400 million barrels of oil from the emergency reserves, which is the biggest release in the history of the Agency.
However, the IEA statement underlined that this is not sufficient on its own, emphasizing that “a critical and immediate tool” is required on the demand side to reduce the pressure on consumers’ affordability and security of supply.
IEA Executive Director Fatih Birol warned of escalating risks, stressing: “The war in the Middle East is creating a major energy crisis, including the largest supply disruption in the history of the global oil market. In the absence of a swift resolution, the impacts on energy markets and economies are set to become more and more severe.”
He also explained the importance of the demand side solutions, stating that they provide “a menu of immediate and concrete measures that can be taken on the demand side by governments, businesses and households to shelter consumers from the impacts of this crisis.”
IEA demand-side measures
The agency recommended a set of measures to manage the worsening energy crisis. Working from home can decrease fuel consumption related to commuting, it suggested, while lowering highway speed limits by at least 10 km per hour can decrease both passenger and freight transport fuel consumption, it explained.
According to the Agency, the benefits of increasing the use of public transport, introducing systems of alternating vehicle access in major cities, and promoting car-sharing and efficient driving habits.
In aviation, decreasing air travel can ease pressure on the jet fuel market. In the case of the LPG market, the report recommends diverting the use of LPG to meet basic needs such as cooking.
The statement also urged the industry to contribute by shifting from LPG to alternative feedstocks like naphtha, as well as making short-term improvements in efficiency and maintenance to reduce oil consumption.
It encouraged governments to lead through regulatory measures, incentives, and support for consumers. Based on the lessons learned from previous energy crises, the IEA concluded, “well-targeted support mechanisms are more effective and fiscally sustainable than broad-based subsidies.”