Chevron CEO says physical shortages in oil supply will begin appearing
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Mr Mike Wirth, chairman and CEO of Chevron, pointed out that the last scheduled shipment of oil from the Persian Gulf was being offloaded at the Port of Long Beach in the US.
PHOTO: REUTERS
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HOUSTON – Chevron chairman and chief executive Mike Wirth said on May 4 that physical shortages in oil supply would begin appearing around the world because of the closure of the Strait of Hormuz, through which 20 per cent of global crude supply passes.
Economies will begin shrinking, first in Asia, as demand adjusts to reduced supply with the strait still closed because of the US-Israeli war with Iran, he said during a discussion sponsored by the Milken Institute.
“We will start to see physical shortages,” Mr Wirth said, noting that surplus supply in commercial markets, tankers in so-called shadow fleets avoiding sanctions, and national strategic reserves were being absorbed.
“Demand needs to move to meet supply,” he added. “Economies are going to have to slow.”
Asia is most heavily dependent on the Gulf’s oil production and refineries, with Europe likely to be affected next.
Mr Wirth noted that the US, a net exporter of crude, would be less affected than other parts of the globe, but eventually the effects would be felt there as well. He pointed out that the last scheduled shipment of oil from the Gulf was being offloaded at the Port of Long Beach, which supplies Los Angeles and southern California.
The overall effect of the Hormuz closure is “potentially as big as in the 1970s”, he said. Two major supply disruptions in that decade shook economies around the world, leading to fuel rationing and long lines at retail pumps.
Because of the Hormuz closure, Spirit Airlines went out of business over the weekend as the cost of jet fuel surged amid tighter supplies.
Mr Wirth also said he is concerned about the safe passage of ships through Hormuz as the US attempts to restore transit.
The US and Iran exchanged fire in the region on May 4 as the US military began escorting vessels through the strait. The escalation threatens to derail a fragile ceasefire declared in April.
“I’ve been in touch with our people that manage our shipping assets in the region, and we remain concerned about the security of transit,” Mr Wirth said. “So it seems like we still have some issues to work through.” REUTERS, BLOOMBERG
