U.S. officials this week said the historic spike in fuel prices during the war in Iran will be short-term and trumpeted record U.S. production at an industry conference where oil executives and government officials from Asia, the Middle East and Europe bemoaned the worst oil and gas supply disruption in decades.
The contrasting messages relayed to industry leaders at the annual CERAWeek conference in Houston reflected the different political realities in the U.S. and the rest of the world.
U.S. cabinet members said American consumers could absorb a temporary price shock. Their effort to project calm reflected the political stakes for President Donald Trump, who has slid in the polls even as he repeatedly said the war is already won and promised the financial pain will be short-lived.
Still, Iran has continued hitting its neighbors with missile and drone strikes while keeping the Strait of Hormuz closed to shipping, halting a fifth of global oil and gas supplies. Global oil prices have spiked above $100 a barrel.
Supply disruptions have already slowed the global economy. Some countries in Asia dependent on Middle East oil face fuel shortages and are taking steps such as work-from-home directives. Europe is bracing for shortages to hit next month.
The impact of the war on energy supplies would last much longer than the conflict itself, executives said, because of damage inflicted on oil and gas infrastructure by Iran in response to the U.S.-Israeli attacks.
Trump’s approval rating has slumped to its lowest point since he returned to the White House, a Reuters/Ipsos poll found, as many Americans have blanched at surging fuel prices and disapproved of the war on Iran. Trump’s Republican Party faces a fight to retain slim majorities in the U.S. Congress in November’s midterm elections. The issue of affordability has emerged as a central theme.
“Markets do what markets do,” U.S. Energy Secretary Chris Wright said in the keynote address at the conference. “Prices went up to send signals to everyone that can produce more, please, produce more. The prices have not risen high enough yet to drive meaningful demand destruction.”
Wright touted expanding U.S. liquefied natural gas exports, efforts to keep coal power plants from retiring and plans to cut red tape for new nuclear projects.
“Every day our mission remains clear: grow energy, improve American lives, strengthen American security and strengthen the world,” Wright said.
Interior Secretary Doug Burgum acknowledged the higher fuel prices were impacting Americans but said it would be short-term.
“President Donald Trump is super empathetic, as we all are, about the fact that there’s been a temporary increase in pricing,” Burgum said at an event on the sidelines of the conference.
Executives and officials from other countries said the global energy system was in crisis and that high prices would not come down as quickly as Trump predicts even if the conflict ends.
Americans have not faced an immediate fuel shortage like those afflicting economies across Asia. Still, surging U.S. gasoline pump prices have exposed American consumers to price rises on the global oil market that have priced in shortages. Higher fuel prices are also pushing up the cost of food and consumer goods.
“This is raising the cost of living for those who can least afford it and slowing economic growth everywhere. From factories to farms to families around the world, the human cost is mounting by the day,” Sultan Al Jaber, CEO of Abu Dhabi’s state-run energy giant ADNOC, told attendees via videolink from the United Arab Emirates.
The UAE, like its Gulf neighbors, has been hit by Iranian missiles and drones and has had to cut oil production because it cannot export through the Strait of Hormuz.
Asian countries dependent on Middle East energy imports already face shortages of fuel and gas. Officials of Asian governments are weighing work-from-home policies and stimulus measures last enforced during the COVID pandemic.
Emergency efforts were “not enough” to ease market strain, said Takehiko Matsuo, Japan’s Vice Minister for International Affairs.
Japan has asked the International Energy Agency for an additional release from strategic petroleum reserves. Tokyo also is tapping cash reserves to subsidize soaring gasoline prices and is considering intervening in oil futures markets to shore up the yen.
The Philippines declared a state of emergency. The country had just 45 days of oil supply as of March 20.
South Korea has asked people to cut shower time, charge phones during the day and run vacuums on weekends.
The fuel supply shortages would spread to Europe in April if the conflict continues, Shell CEO Wael Sawan said.
“Countries cannot have national security without energy security,” Sawan said at the conference.
Consultancy Rystad Energy estimates that war damage to refineries, LNG and other facilities could cost $25 billion to repair. Even undamaged infrastructure would take months to restart. Kuwait would take three to five months to get crude production back to pre-war levels, Kuwait Petroleum CEO Sheikh Nawaf Saud Al-Sabah said.
“It will take time to come out of this,” Chevron CEO Mike Wirth said Monday, noting that the energy market’s tightness from the Strait of Hormuz closure has not yet been fully reflected in forward oil prices.
The industry also warned that the U.S. cannot quickly ramp up oil or gas output to offset the disruption. Shale producers said prices above $100 a barrel would need to stay elevated for months before companies consider boosting drilling, as most operators have already locked in spending plans for the year.
(Reporting by Jarrett Renshaw)
