Lead
The International Monetary Fund (IMF) has cautioned that the global economy's ability to absorb energy shocks is nearly exhausted, as depleted oil reserves and shrinking inventories leave economies vulnerable to further disruptions. The warning comes amid the ongoing conflict involving the United States and Iran and the closure of the Strait of Hormuz to certain shipping.
In an analytical note published on its blog, the IMF said that while the initial blow of the energy crisis was cushioned by available spare capacity and inventory drawdowns, that room has now been largely used up. "Unless inventories are replenished, the world will start from a weaker position when the next shock comes," the report said.
Coverage Comparison
ABC Australia reported that the IMF warned that depleted oil reserves have left economies vulnerable to soaring fuel prices as the US-Iran conflict resumes. The report noted that before the war began, global oil supplies were about 2 million barrels a day above demand, which helped prevent bigger price shocks. However, the IMF said that "with buffers now depleted, the system is more exposed if disruptions persist or escalate anew, and rebuilding stocks will keep the market tight even as supply recovers."
TASS reported the IMF's warning that the global oil shortage will ease only gradually, with reserves approaching minimum levels, which threatens problems for the energy sector's physical infrastructure. According to the report, "whenever supply begins to recover, the oil deficit will close only gradually, drawing inventories closer to operational minimums - the level below which the physical system itself begins to bind."
Multiple reports, all citing the IMF's analytical note, stated that by the end of May, more than 1.1 billion barrels of crude - equivalent to about 10 days of typical global consumption - had not reached the market. The IMF also warned that prolonged production halts could cause permanent output losses, especially where financing to restart wells is scarce.
Key Claims
The IMF warned that the global economy will start from a weaker position when the next shock comes, unless inventories are replenished.
More than 1.1 billion barrels of crude had not reached the market by the end of May, a shortfall exceeding those of the 1973 oil shock, the Iran-Iraq war, and the Gulf War.
Restoring normal oil supply volumes from the Middle East will take two to three months even if shipping through the Strait of Hormuz is fully restored, according to industry estimates cited by the IMF.
The oil price has increased by more than 10 per cent following the most recent closure of the Strait of Hormuz, as reported by ABC.
The IMF stated that the global oil shortage will ease only gradually, and that reserves are approaching minimum levels.
Perspectives
International Monetary Fund: The IMF warns that the global economy's capacity to contain the energy crisis is largely exhausted, and that unless inventories are replenished, the world will be more vulnerable to future shocks. The IMF emphasizes the need for a quick supply recovery to avoid further damage.
Bloomberg (via TASS): Citing estimates from Baringa Partners, Bloomberg reported that the UK and Europe face a contraction in GDP for the year if the Strait of Hormuz does not resume full operations by October. Additionally, Bloomberg reported that Qatar plans to notify European customers that the force majeure situation regarding gas exports will persist until mid-October.
US and Iranian governments: The conflict between the US and Iran, including the closure of the Strait of Hormuz, is the root cause of the energy disruption. The US and Israel launched a war against Iran on February 28, and Iranian authorities closed the strait to vessels linked to the US, Israel, and countries supporting what Tehran described as aggression. A ceasefire was signed in June but later broke down.