U.S.-Israel-Iranian conflict escalating global energy, supply chain crisis

The U.S.-Israel led attack against Iran continues to impact the global oil supply by cutting off Persian Gulf crude production and distribution. It's not only impacting the global energy supply, it also is facilitating a supply chain and food stability crisis with ripple effects throughout the economy, experts warn. After three weeks of conflict, President Donald Trump has imposed a Tuesday night deadline for Iran to open the Strait of Hormuz. Industry experts argue that although reopening the strait is imperative, extensive damage has been done that will take years to fix and consumers can expect costs to go up and stay up. The U.S.-Israel attack on Iran has resulted in a net loss of 13.5 million to 14.5 million barrels per day (bpd) of crude oil being transported through the Strait, Andrew Lipow, with Houston-based Lipow Oil Associates, said in a statement. Another nine to 10 million bpd of crude oil production has been shut off in Iraq, Kuwait, Saudia Arabia and the UAE. From Feb. 27 to April 6, the conflict has caused gasoline futures on the West Texas Index (WTI) to increase by 42% and diesel futures to increase by 69%. This translates to American consumers paying about $830 million more a day for transportation fuel than before the Iran conflict, Lipow estimates. The WTI already reached $120 a barrel in March, The Center Square reported. Last week, oil futures were at $112 a barrel and the Dallas Fed highlighted how the conflict was creating uncertainty for the U.S. oil and natural gas industry. In January, the Texas oil and gas industry reported another month of extraction job losses as rig counts continued to decline, The Center Square reported. A $120 WTI price translates to more than $4 a gallon for gasoline and more than $5 a gallon for diesel. Ports are charging fuel surcharges, which are being passed on to consumers in the form of higher costs for goods and groceries. Petrochemical prices have also increased by nearly 50%, impacting all plastic goods, Lipow adds. "Even if the conflict were to end tomorrow and the Strait of Hormuz were to reopen, oil prices would not return to pre-conflict levels of $67 per barrel," Lipow reiterated. "The damage to energy infrastructure is done and will take months if not years to repair the more extensively damaged facilities." Middle East jet fuel exports total 600,000 bpd through the Strait, or nearly 8% of the global demand. Middle East diesel fuel exports totaled 1.2 million bpd through the Strait, or roughly 4% of world demand. "To make up for the jet shortfall, refiners around the world would have to increase their crude oil throughput by 6 million bpd," Lipow said, which is unlikely to happen. "Even if the conflict ended tomorrow, almost 3 million barrels per day of refinery capacity has been damaged in the Middle East from missile and drone attacks and needs to be repaired." One way to solve the jet fuel shortage is to cut flights, which several airlines have already announced. They're also increasing fees, including on checked baggage. This is after U.S. airlines have already been grappling with problems stemming from the longest federal shutdown of national security agencies in U.S. history. After two months of Congress failing to reach an agreement to fund TSA agent salaries, Trump issued an executive order to provide emergency funding. Aluminum, helium and fertilizer shortages are also increasing due to Iranian retaliatory strikes and the Strait's effective closure. The price of aluminum has reached a four-year peak after Iran attacked two major smelters in Bahrain and UAE, Reuters reported. It could take years to rebuild Qatar's helium production, which was damaged after Iran struck Qatar's largest liquefied natural gas facility, the New York Times reported. Roughly one-third of the global fertilizer supply shipped through the Strait is at risk. "While the United States is both a fertilizer producer and importer, those same global supply dynamics play a role in determining input costs for American farmers," the Fertilizer Institute says. "The full extent of impacts [of the conflict] to the U.S. fertilizer market remains uncertain." While the USDA has begun distributing up to $12 billion in subsidies to eligible farmers, it's only seen as an expensive stop gap measure. Iran isn't expected to comply with Trump's demands. Meanwhile, Yemeni Houthis have opened up another front in the conflict after attacking Israel. "Their actions could impact southbound traffic in the Red Sea through the Baba al Mandeb Strait. Northbound, the Su-Med Pipeline has a capacity of 2.5 to 3 million barrels per day," Lipow said. Last March, Trump launched Operation Rough Rider to target the Houthis. It was the first U.S. military operation in the Middle East of his second term. He claimed targeted air and naval strikes obliterated Houth rebels in Yemen who'd been targeting ships in the Strait. One year later, they launched attacks against Israel.