Energy experts warn that the U.S.-Iran agreement to ease tensions and reopen Strait of Hormuz won't solve high oil and gas prices overnight . Despite announcement,months may pass before energy firms restore operations to meet global demand as logistical challenges remain.
For over three months,oil tankers stuck in Persian Gulf,cannot navigate strait,critical for about 20% of world’s oil and gasoline. Daniel Evans,global head of fuels and refining research at S&P Global Energy,said rebuilding confidence and securing shipping insurance will take time. “It’s going to take time for people to feel comfortable and for insurance to be in place,” he said.
Oil prices dipped after the announcement. Brent crude dropped $3.45 to $83.89 per barrel,U.S. benchmark fell $4.03 to $80.85. But prices still much higher than the ~$70 per barrel before conflict.
Evans pointed out logistical hurdles go beyond just reopening the strait. Ships must clear out before new tankers can load. Safety confidence is key for shipping. “To bring a ship in, you need to be confident that you’ve got a big enough window of safety,” he noted.
Slow oil tanker travel complicates things. Months needed to move crude from strait to refineries then final destination . Some Middle Eastern producers halted extraction due to storage limits,a situation needing time to fix. Alan Gelder,senior VP at Wood Mackenzie,said countries like Saudi Arabia and UAE,with alternate oil routes,may resume faster than others.
Iraq faces bigger hurdles with extensive shut-ins and complex oil fields. Gelder estimated up to a year for Iraq to hit full production. Energy sector investment stalled since strait's closure,restarting needs time and capital.
Nations pausing oil production likely remain cautious until a stable ceasefire ensured . Daniel Sternoff,senior fellow at Center on Global Energy Policy,Columbia University,noted uncertainty around strait reopening. “We don’t know what open means or what the speed of evacuation of trapped material is going to be,” he remarked.
As world watches agreement's full impact unfold,energy market stays tense. Complexities of resuming oil operations in region suggest relief from high prices will be slow,not quick…
