Transcription
It's not just jet fuel that's seeing a spike. The turmoil in the Middle East has triggered a wave of hikes on energy and products around the world. Eda Cowdy is NHK's deputy chief commentator. She's here to explain how all this is playing out. Cowdy, can you help us understand where things stand economically right now?
Sure. Well, we're looking at a possible ceasefire extension. The Strait of Hormuz is still being tightly controlled and it's spelling trouble for the global oil supply. Particularly in Asia, which depends heavily on Middle Eastern crude oil. It's probably easiest to see the impact at the pumps. Here in Japan, prices are up only 8% due to government subsidies, but they've doubled or almost doubled in some Asian countries already. Myanmar is the biggest hit with prices up 108%. Remember, 80% of the oil coming through the Strait of Hormuz goes to Asian markets. So, this part of the world has a lot to worry about right now. Experts are even warning that the Iran shock could turn into a full-blown economic crisis for Asia.
That sounds absolutely ominous. Cowdy, how's the rest of the world faring?
James, not much better. Um in Australia, for instance, gas prices are up almost 30%. This is because refinery rationalization has left the country with only two operating refineries, forcing it to rely heavily on gasoline imports from Singapore and elsewhere. In Europe, prices are also climbing. Germany and the UK are both up around 20%. The US is taking a hit, too, with prices up 42% at the pumps.
How are governments responding to this?
Um some are responding with pretty severe measures to conserve energy. The Philippines is in a state of emergency, and government employees are down to a 4-day workweek to reduce travel. In South Korea, driving is restricted based on whether license plates end in an odd or even number. And to curb air conditioning use, Singapore and Bangladesh are asking people to keep indoor temperatures to 25°C, and in Sri Lanka and Thailand, that's 26°. We're not seeing any official guidelines to conserve oil in Japan. The country has about 8 months reserves, and the prime minister says she expects to secure enough supply to last through early next year. And she's pointed out that routes are being developed to bypass the Strait of Hormuz.
And speaking of, if the Strait reopens sooner rather than later, how will that affect markets?
Um I'm seeing a lot of concern that even if we return to the status quo tomorrow, high prices will persist. Hundreds of ships are stranded in the Strait right now, and it'll take time to make sure they can move on safely. The International Monetary Fund is also warning that damage to oil infrastructure in the Middle East means it'll take a while for production to return to pre-conflict levels.
So, it sounds like shortages and high prices will unfortunately continue.
Yes, it's looking that way. The IMF is now forecasting slower economic growth around the world because of this oil crisis. People are saying it's the biggest shock since COVID and even the 2008 global financial crisis. The de facto closure of the Strait of Hormuz Hormuz has effectively removed about 20% of the world's oil from the market. And even now, some analysts argue that current prices are based on what they call irrational optimism. It could get a lot worse and last for a long time, with some estimates at about 2 years for Middle East oil production to be restored to normal levels. As the International Energy Agency put it, even the wealthiest countries cannot escape this crisis.
Thanks so much. That was NHK's deputy chief commentator Eda Cowdy.