Europe Faces Jet Fuel Shortage Within Weeks, IEA Chief Warns

Europe becomes the latest region revealing the effects of the US-Iran war. With Tehran closing the Strait of Hormuz for weeks now, the head of the International Energy Agency (IEA) warns that their fuel supply may not last long.

According to IEA Chief Fatih Birol, their current inventory may reach a critical point by June if they are unable to replace it with imports from the Middle East, per a report by the Associated Press. He went on to explain that if this continues, the looming possibility of flight cancellations beckons.

'In the past there was a group called 'Dire Straits.' It's a dire strait now, and it is going to have major implications for the global economy. And the longer it goes, the worse it will be for economic growth and inflation around the world,' Birol said.

He went on to add that the crisis also includes local fuel and energy as well. With the supply shortage, the price of gas and electricity is likely to shoot up as well.

'The impact will be "higher petrol (gasoline) prices, higher gas prices, higher electricity prices,' he added.

As an example, the jet fuel price before the US-Iran war was at $831 (£614) per tonne. Those figures skyrocketed in April with the price surging to $1,838 (£1,387) per tonne. Other countries have also experienced such astronomical fuel price surges such as the Philippines.

The Turkish economist understands that the situation varies per country. He acknowledges that some countries may be struggling while others may not. But overall, he believes that the US-Iran war is a problem that affects the entire world.

'Some countries may be richer than others. Some countries may have more energy than others, but no country, no country is immune to this crisis,' Birol explained.

Europe Scrambling for Alternative Fuel Sources

The IEA mentioned that in the past, 75% of its jet fuel imports came from the Middle East. But with the current Middle East conflict, Europe is left with no recourse but to look for alternatives to ensure that their supplies are sufficient.

The US and Nigeria were mentioned as potential alternatives according to analysts in a report by the BBC.

Beyond these two countries, Europe is aware that they need to broaden their search. With a huge deficit to cover stemming from the standard fuel imports they get from the Middle East, the amount of supplies they are able to procure would determine how long their transportation needs can stay afloat.

'Consequently, for now, it would appear that European markets will need to work harder to attract further replacement cargoes from elsewhere if sufficient inventory is to be maintained over the summer months,' the IEA added.

No Fuel Price Relief In Sight Amid Ongoing Conflict

With the US and Iran failing to reach something amicably, warfare and the fuel crisis are expected to continue. With the US putting up a blockade of Iranian ports, the conflict is arguably far from being resolved.

The blockade was ordered by US President Donald Trump in reaction to Tehran allegedly not reopening the Strait of Hormuz. This move was also seen as a strategy to place more pressure on Iran after peace talks mediated by Pakistan fell through.

'The US action is a blockade of Iran's ports and coastline, not a blockade of the Strait of Hormuz,' Joint Chiefs of Staff Chairman Dan Caine said via CNBC. 'It applies to all ships, regardless of nationality, heading into or from Iranian ports,' he added.