By Jarrett Renshaw
HOUSTON, March 26 (Reuters) – U.S. officials said this week that the historic surge in fuel prices during the war in Iran will be short-term and touted record U.S. production at an industry conference where oil executives and government officials from Asia, the Middle East and Europe lamented the worst disruption to oil and gas supplies in decades.
The contrasting messages conveyed to industry leaders at the annual CERAWeek conference in Houston reflected the different political realities in the United States and the rest of the world.
U.S. Cabinet members said American consumers could absorb a temporary price shock. His effort to project calm reflected the political stakes for President Donald Trump, who has fallen in the polls even as he repeatedly said the war is already won and promised the financial pain would be short-lived.
Still, Iran has continued to attack its neighbors with missiles and drones, while keeping the Strait of Hormuz closed to shipping, halting a fifth of the world’s oil and gas supply. Global oil prices have soared above $100 a barrel.
Supply disruptions have already slowed the global economy. Some Asian countries that rely on Middle East oil are facing fuel shortages and are taking measures such as work-from-home directives. Europe is preparing for shortages that will occur next month.
The war’s impact on energy supplies would last much longer than the conflict itself, executives said, because of the damage inflicted on oil and gas infrastructure by Iran in response to attacks by the United States and Israel.
Trump’s approval rating has fallen to its lowest point since he returned to the White House, according to a Reuters/Ipsos poll, as many Americans have blanched at rising fuel prices and disapproved of the war against Iran. Trump’s Republican Party faces a fight to retain slim majorities in the US Congress in November’s midterm elections. The issue of affordability has become a central issue.
“Markets do what markets do,” said US Energy Secretary Chris Wright in the conference’s keynote address. “Prices rose to send signals to everyone who can produce more: please produce more. Prices have not yet risen enough to cause significant demand destruction.”
Wright touted the expansion of U.S. exports of liquefied natural gas, efforts to prevent coal-fired power plants from retiring and plans to reduce bureaucracy for new nuclear projects.
“Every day our mission remains clear: grow energy, improve American lives, strengthen American security and strengthen the world,” Wright said.
Interior Secretary Doug Burgum acknowledged that higher fuel prices were hurting Americans, but said it would be short-term.
“President Donald Trump is very empathetic, as we all are, about the fact that there has been a temporary increase in prices,” Burgum said at an event on the sidelines of the conference.
Executives and officials in other countries said the global energy system was in crisis and that high prices would not fall as quickly as Trump predicts, even if the conflict ends.
Americans have not faced immediate fuel shortages like those affecting economies across Asia. Still, rising gasoline prices at U.S. pumps have exposed American consumers to price increases in the global oil market that have priced in shortages. Higher fuel prices are also raising the cost of food and consumer goods.
“This is raising the cost of living for those who can least afford it and slowing economic growth everywhere. From factories to farms to families around the world, the human cost is increasing by the day,” Sultan Al Jaber, chief executive of Abu Dhabi state energy giant ADNOC, told attendees via video link from the United Arab Emirates.
The United Arab Emirates, like its Gulf neighbors, has been hit by Iranian missiles and drones and has had to cut oil production because it cannot export through the Strait of Hormuz.
Asian countries that rely on energy imports from the Middle East already face fuel and gas shortages. Asian government officials are weighing work-from-home policies and stimulus measures that were last implemented during the COVID pandemic.
Emergency efforts were “not enough” to ease market tension, said Takehiko Matsuo, Japan’s Vice Minister of International Affairs.
Japan has asked the International Energy Agency for additional release of strategic oil reserves. Tokyo is also tapping into cash reserves to subsidize rising gasoline prices and is considering intervening in oil futures markets to prop up the yen.
The Philippines declared a state of emergency. The country had only 45 days of oil supply as of March 20.
South Korea has asked people to reduce shower time, charge phones during the day and vacuum on weekends.
Fuel supply shortages would spread to Europe in April if the conflict continues, Shell CEO Wael Sawan said.
“Countries cannot have national security without energy security,” Sawan said at the conference.
Consulting firm Rystad Energy estimates that repairing war damage to refineries, LNG and other facilities could cost $25 billion. Even intact infrastructure would take months to restart. It would take Kuwait three to five months to recover crude production to pre-war levels, Kuwait Petroleum CEO Sheikh Nawaf Saud Al-Sabah said.
“It’s going to take time to get out of this,” Chevron CEO Mike Wirth said Monday, noting that energy market stress over the closure of the Strait of Hormuz has not yet been fully reflected in future oil prices.
The industry also warned that the United States cannot quickly increase oil or gas production to offset the disruption. Shale producers said prices above $100 a barrel would have to remain elevated for months before companies consider boosting drilling, as most operators have already set spending plans for the year.
(Reporting by Jarrett Renshaw; Editing by Simon Webb and David Gregorio)
