Global Oil Security Looks Shakier as Conflicts Hit 45 Million Bpd of Supply

Almost half of the world's oil supply comes from regions currently experiencing conflicts, raising concerns about long-term oil supply security. The Middle East remains the most significant example, with oil production severely compromised. Meanwhile, Ukraine is targeting Russian refineries with drones, causing fuel shortages beyond Russian borders.

The Gulf states, a major refined fuel exporter, are also facing challenges. The crisis in fuel, rather than crude oil, is now a primary concern in Europe, where diesel prices have surged by 70% due to dependence on imported fuels. Another major oil chokepoint, the Strait of Hormuz, is under threat from attacks by the Yemeni Houthis, causing longer shipping routes and increased costs.

Iran and Oman are discussing joint management of the Strait to reopen it. Developments in Russia and Ukraine are less optimistic, with Ukrainian forces striking refineries daily and a ban on gasoline and diesel exports still in place. Global reliance on U.S. crude and refined fuels is increasing, but Canadian and Venezuelan crude supplies are declining.

The world's oil production last year accounted for 43% of global output, but the Middle East's production is down by between 5 and 7 million barrels daily due to conflicts, and global refining capacity is down by 10%. Inflation is rising worldwide, and the U.S. debt has hit an all-time high of $40 trillion. The current energy crisis is driving a race for alternative oil and energy supplies, including pipelines, solar power, and electric vehicles.