As fears of a major oil crisis mount, Iran continues to bombard the Strait of Hormuz. In response, several organizations have announced the release of oil reserves, while in France, calls for government-funded fuel subsidies are growing. Here’s an update on Thursday.
The Strait of Hormuz Remains a Target, Oil Supplies Reduced
This week, several ships were hit by Iranian strikes in the Strait of Hormuz, the key supply route for oil from the Middle East. Iran continues to target this area, notably deploying mine-laying vessels. As a reminder, 20% to 25% of global oil production passes through the Strait of Hormuz.
The world’s major economies are keeping a close eye on the strait, trying to reopen the passage. Donald Trump has reiterated his threats against Iranian forces that attempt to mine the strait, while Emmanuel Macron has called for the use of military escorts to restore the oil supply. For now, the situation remains at a standstill.
The number of ships passing through the Strait of Hormuz each day has plummeted
The war in the Middle East and the supply disruption have sent the price of a barrel of Brent crude soaring. It reached $120 on Monday, March 9, and is still at $96 today. Gas prices have followed suit: a liter of diesel has exceeded 2 euros at many gas stations this week.
A temporary release of oil reserves
Faced with this critical situation, 32 member countries of the International Energy Agency (IEA) announced the release of 400 million barrels held in emergency reserves to address the supply shortage. For its part, the U.S. Secretary of Energy announced that the United States would release 172 million barrels starting next week.
The release of these reserves remains relatively symbolic: the world consumes more than 100 million barrels of oil per day. However, this corresponds to about 20 days’ worth of the volumes exported through the Strait of Hormuz. The hope, therefore, is that this timeframe will allow for an end to the war, which faces a high risk of becoming bogged down.
Temporary Drop at the Pump and Calls for Funding
This Wednesday in France, managers at Leclerc and Coopérative U stores announced negotiations with refiners to lower prices at the pump. We should see price cuts of 30 centimes per liter by this weekend at gas stations. This is a temporary reduction, but it should provide some relief for French consumers’ wallets.
In response to soaring prices, new calls for financial aid for French citizens have been made. But so far, the Ministry of Finance has strongly opposed the idea: the government is instead considering capping profit margins. François Villeroy de Galhau, the governor of the Bank of France, also stated that the country simply does not have the means to subsidize French citizens’ fuel purchases:
We have no money left. […] The real long-term solution is to achieve energy independence.
All eyes therefore remain fixed on the Middle East, on the 13th day of the war launched by the United States and Israel.
