Ripple effect

A regional war is fast turning into a global energy crisis with dangerous political and economic consequences

- BY D.P. SRIVASTAVA

THE ISRAELI ATTACK on Iran's gas field in South Pars on March 20 marked a dangerous escalation in the war which erupted on February 28. This was followed by Iranian retaliation across the Gulf, in which a number of oil and gas installations in the Gulf states were hit. This included the Ras Laffan plant in Qatar. The plant, which was already shut down, suffered further damage. Qatar said the repair work would take up to five years. US President Donald Trump distanced himself from the Israeli strike and said that neither the US nor Qatar had any knowledge of it, and Iran did not know this. Trump added that he had advised Israel against attacks on energy installations in future. The price of Brent crude, an international benchmark, jumped to $106.41 per barrel. It has since come down to $99.46 per barrel. The Indian crude oil basket has crossed $157 per barrel. It was trading at $70.86 per barrel on the eve of the war. An increase of $1 per barrel adds ₹14,000 crore to India's annual import bill.

The second oil price shock was triggered by the loss of 10 per cent of global production in 1979. We may now be seeing the beginning of the third oil price shock. Its effect will be much worse since this time global gas supplies are also affected. The closure of the Ras Laffan plant has resulted in a loss of 20 per cent of the world's LNG supply.