BREAKINGVIEWS-Iran war will put energy barters on the table

By Antony Currie

MELBOURNE, March 23 (Reuters Breakingviews) - Fatih Birol is trying to shake the world out of its complacency. In a visit to Canberra on Monday, the boss of the International Energy Agency echoed sobering comments he gave to the Financial Times last week that the U.S.-Israeli war on Iran has created the greatest threat to global energy security "in history". How governments respond to his wake-up call risks worsening the crisis, though.

Birol has ample data to back up his assertion. The conflagration in the Middle East has removed 11 million barrels of oil a day from global markets, double each of the supply shocks of the 1970s. Meanwhile, the 140 billion cubic metres of natural, or fossil, gas lost is almost twice as much as after Russia's 2022 invasion of Ukraine. Moreover, it will take time to repair or rebuild damaged pipelines and production facilities in the region. Restoring the 17% of Qatar's liquified natural gas (LNG) production hit by Iran last week could take five years, QatarEnergy CEO and state minister for energy affairs Saad al-Kaabi told Reuters on Thursday.

There's only so much that can be done. Oil prices have risen following new attacks and threats, eliminating any relief from the recent release of a fifth of global strategic reserves. Birol says the IEA is talking to Mexico, Canada and others about delaying refinery maintenance and boosting production. And, on Friday, the agency published a 10-point plan for reducing demand, including working from home, reducing driving speeds and avoiding air travel. That's piecemeal if the Strait of Hormuz remains closed.

The Australian government is already mulling a different plan: using its vast exports of LNG to persuade trading partners to keep oil imports flowing, according to the Sydney Morning Herald and AFR, citing sources. The country is a top-three exporter of both that and coal yet imports as much as 90% of its oil and has roughly a third of the 90 days of reserves required by the IEA. Reminding China, Malaysia and other suppliers of black gold and commodities like fertilisers that are also in short supply that they're dependent on Australian energy products could keep supply lines open. Others like Indonesia, the world's biggest coal exporter, may consider following suit.

Trouble is, the tactic has broader downsides. It would stoke protectionism and an even greater uncertainty of supply as countries negotiate. It would also widen the gap between those that do and don't have fossil fuels within their borders to barter with. And it would almost certainly lead to higher prices all around.

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CONTEXT NEWS

Australia's Prime Minister Anthony Albanese is considering using the country's vast exports of coal and natural, or fossil, gas as leverage to persuade trading partners to keep sending oil for petrol, diesel and jet fuel Down Under, the Sydney Morning Herald reported on March 23, citing sources.

Separately, Dr Fatih Birol, executive director of the International Energy Agency, said during a visit to Canberra that the U.S.-Israel attack on Iran has so far caused a loss to the global economy of 140 billion cubic metres of fossil gas, almost double the amount lost as a result of the Ukraine war. Birol also said, "Let's not forget that Australia makes a major contribution to global energy security...[It has been] a cornerstone for years with LNG."