Will global oil supply be at risk if Iran and Israel pull the Middle East into war?

By Flavio Macau, Edith Cowan University

Tensions in the Middle East have escalated following Iran’s weekend missile and drone attacks on Israel, heightening concerns of a wider conflict.

As with the Russian invasion of Ukraine, further conflict has the potential to destabilise oil prices and disrupt supply chains.

In Australia, already grappling with a cost-of-living crisis, the ripple effects could soon be felt.

Rising oil prices lead to increased inflation, first affecting fuel prices at petrol stations, advancing to to the prices of fresh produce and groceries delivered by truck, and finally spreading to most transactions in a connected economy.

But how concerned should we be?

The United States Energy Information Administration says Iran is responsible for about only 2% to global oil supplies, none of them coming to Australia.

Higher prices would hurt, wherever our fuel comes from

Malaysia is Australia’s major supplier of oil and Singapore and South Korea supply most of our petrol and diesel. The Middle East seems too distant to matter.

But oil prices are set globally, and a small group of countries have a large impact on it.

Founded in the 1960s, the Organisation of the Petroleum Exporting Countries (OPEC) originally included Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, which between them controlled the majority of global oil exports.

This meant conflicts involving OPEC members used to squeeze supplies, causing big spikes in inflation of the kind seen in the 1970s and 1980s.

Not so much today. According to the World Economic Forum, the now 13 members of OPEC produce about 40% of the world’s oil, accounting for about 60% of the petroleum traded globally.

There are more alternatives. Among the non-OPEC producers are countries like Mexico, Kazakhstan, Azerbaijan and Malaysia. In 2022 these non-OPEC producers exported respectable 16.5 million barrels a day compared to OPEC’s 28.7 million.

Read Full Story https://theconversation.com/will-global-oil-supply-be-at-risk-if-iran-and-israel-pull-the-middle-east-into-war-228009