The crisis in the Middle East has clearly shown that fossil fuels remain irreplaceable energy sources on which global economic growth depends, and will certainly remain so for a long time to come. Despite efforts to replace them with renewable energy sources, oil and gas are still the basic energy sources on which the world depends.

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Since February 28, when the US and Israeli bombing of Iran prompted Tehran to close the Strait of Hormuz, where a fifth of the world’s oil and the same amount of gas pass through, the question of how to obtain oil and gas and what their price is has been enduring.

Although the use of renewable sources is increasing, the world economy will continue to be powered by oil and gas for the foreseeable future. It is unrealistic that, as planned by the European Union, the Old Continent will completely switch to renewable energy sources by 2050, reducing carbon dioxide emissions from fossil fuels to zero.

On April 30, the price of oil reached its highest level in the past four years. According to June futures, which indicate what price oil will trade in that month, a barrel of Brent oil will cost $126.10. However, in addition to the futures price, there is also the current price of oil on ships, which, due to insurance, can exceed $170 per barrel.

Some 22% of the world’s oil and about the same share of LNG passed through Hormuz, and Qatar is the world’s second-largest LNG exporter after the United States. Nonetheless, the real calculation is how much production in the Gulf countries has now been reduced because they cannot export or sell the goods. During the 1973 oil crisis, the world market was short by 10% of oil. The current situation with gas is worse because the Iranians have hit two new plants in Qatar, and even the three-to-five-year estimation of restoration raises skepticism.

There are questions about how much American LNG can be relied on, even as a new gas liquefaction capacity is being commissioned. The number of rigs operating each day, which is a rough indicator of how much new gas and oil is being explored in the US, has fallen from about 590 last year to 544. This could indicate that, while the US may be building more liquefaction capacity, the question is how much gas they can put on the global market.

In the oil sector, so-called “Chinese” oil has also entered the market. This is oil that China, the world’s largest oil consumer, imported before the crisis. The Chinese bought and developed large oil reserves, becoming an oil exporter during the Middle East crisis, taking advantage of high prices. This practice of buying low and selling high is not new. The US also sold its oil reserves whenever the price reached $79 per barrel.

Everything that is happening now with gas and oil indicates that they are still irreplaceable, basic energy sources without which the world cannot function. In the 1980s, oil, gas, and coal accounted for 82-83% of the world’s total energy consumption. Today it is the same number, constantly moving between 80 and 85%. Although coal and oil may drop, gas rises.

Source: Global Research