The oil crisis threatens to spread – Visible “immediately” in Finland

The closing of the Strait of Hormuz due to the war between Israel, the United States and Iran has already caused a significant shortfall in energy availability around the world. International Energy Agency IEA called the supply chain shock “the worst in history” in its report.

For the Finnish consumer, the crisis can be seen by the Director General of the Energy Department of the Ministry of Labor and Economy, TEM Riku Huttunen along, at least for the time being, mainly at the petrol and diesel pumps.

“The consumer has actually already noticed the situation in the Middle East at the pumps. These are global products, so yes, it is pretty much immediately visible everywhere if the global price changes.”

Security of Service Center the role of storage is to ensure a buffer in critical raw materials such as grain and oil. The purpose of security of supply is to buy time so that society’s and business life’s own contingency plans can be put into use.

According to Huttunen, the oil stocks that secure Finland’s security of supply are currently sufficient for five months. Stocks larger than the EU and IEA’s three-month obligation have been maintained due to the geographical location. In practice, the only way to transport oil to Finland is through the Baltic Sea.

“We are known to be in a challenging position in the northern regions and we do not have fossil fuel production behind us. For this reason, we are very well prepared with safety and obligation stocks corresponding to about five months’ consumption.”

According to Huttunen, TEM is closely monitoring the situation in the Middle East. The report is prompted by recent threats to bomb infrastructure. Reconstruction is slow, so the effects on the world market could be significantly longer than the closure of the Strait of Hormuz.

“The closure of the Strait of Hormuz is one thing that affects weeks or months, but if we purposefully start hitting the infrastructure, its effects on the oil and gas market can last for years.”

President of the United States Donald Trump backed down on Monday from an earlier threat to attack Iran’s energy infrastructure. Trump said Truth Socialissa that he had given the US Department of Defense an order to postpone the attacks for five days.

The announcement caused oil prices to fall.

Means to use

The IEA published a report on Friday that presented ways to alleviate the impact of the energy crisis by reducing consumption. Among the methods presented were encouraging remote work and reducing speed limits on motorways and roads by at least 10 km/h, i.e. in practice moving to winter restrictions.

Huttunen says that he has read the IEA report, but does not believe that Finland will adopt the tips given in the report for national use. According to him, the advice is more valid in countries where, due to the rise in oil and gas prices, consumers cannot afford, for example, fuel.

“Many of the methods are quite reasonable in themselves, but they don’t fit our situation at the moment. Of course, consumers decide for themselves how much to use their own car, for example, but at the national level the advice is not very relevant now.”

Learning from Corona

BCA Researchin rescuer Marko Papic compares the situation in the Strait of Hormuz in the Financial Times to the shock caused by the corona pandemic to the international production chain.

“According to my assessment, the United States, Israel and Iran have until about mid-April to end the conflict and restore traffic in the Strait of Hormuz. Otherwise, the world must prepare for the first breakdown of the global supply chain after the corona pandemic.”

Huttunen estimates that the effect of the closure of the Strait of Hormuz on Finland, at least in terms of energy, is mainly a price effect.

“For us, transportation in that area is not the biggest problem in energy products, because oil and gas come to us very clearly from the North Atlantic area. So we use, for example, Norwegian oil and American LNG.”