Chevron CEO warns of physical oil scarcity as Strait of Hormuz tensions escalate

Mike Wirth, the CEO of US energy giant Chevron, warned on May 4 that a physical shortage of crude oil is beginning to take hold, driven by the closure of the Strait of Hormuz and the broader impacts of the military conflict involving the US, Israel, and Iran.

Speaking at an industry event, Wirth provided a stark assessment of the global energy landscape. “We are going to start seeing physical scarcity,” Wirth said. “Demand must adjust to supply. Economies will have to slow down.”

Wirth noted that Asian economies, which maintain the highest dependency on Persian Gulf energy production, would be the first to suffer the consequences. He indicated that Europe would be affected next. While the US is expected to be less severely impacted, Wirth added that it would not remain entirely immune to the escalating crisis.

The Chevron executive further disclosed that the final scheduled shipment of crude oil from the Gulf is currently being discharged at the Port of Long Beach, a critical facility serving Los Angeles and Southern California.

Wirth characterized the situation in the Strait of Hormuz as having the potential for an impact “as large as the 1970s,” specifically referencing the 1973 Arab oil embargo.

The timing of Wirth’s remarks coincides with a period of daily escalations in the strategic waterway between Washington and Tehran. Since the cessation of the ceasefire, the US has maintained a blockade of Iranian ports. Tehran, in response to Washington’s seizure of Iranian vessels near the Strait, recently seized several ships and warned of further retaliatory measures.

On Monday, Iranian forces launched two missiles at a US warship near the Strait and subsequently targeted energy infrastructure in the United Arab Emirates. The US military announced it had struck Iranian military speedboats; however, Iranian state media reported that five civilians aboard a cargo vessel were killed in the strike.

In the wake of these developments, global oil prices have resumed an upward trajectory. Brent crude, the international benchmark, surged 6% to reach $114.44 per barrel. As of May 5, the price remains positioned just below the $114 mark.

Several nations have already moved to implement energy rationing due to the crisis triggered by the US-Israel conflict with Iran, which began in late February. Countries currently facing energy restrictions include the Philippines, Sri Lanka, Myanmar, Thailand, Nepal, and Bangladesh.

A massive anticipated shortage in fertilizer is also projected to severely impact developing nations. Svein Tore Holsether, the CEO of fertilizer major Yara, told the BBC last week that the current situation places billions of meals at risk.

“Because of the situation we are in, up to half a million tons of nitrogen fertilizer is currently not being produced globally,” Holsether said. “What does this mean for food production? I would say that up to 10 billion meals every week could fail to be produced as a result of the fertilizer shortage.”

Holsether added that while the fertilizer market is global in scope, with products moving across the planet, the primary destinations are Asia, Southeast Asia, Africa, and Latin America. He emphasized that these regions would experience the most immediate effects, noting that Sub-Saharan Africa could face a particularly severe impact.