Chevron Chairman and
CEO Mike Wirth said on Monday that physical shortages in oil
supply would begin appearing around the world because of the
closure of the Strait of Hormuz, through which 20% 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, Wirth said during a
discussion sponsored by the Milken Institute.
“We will start to see physical shortages,” 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 said. “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, Wirth
said.
Wirth noted that the United States, 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,” Wirth 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.