NewsRescue
Growing global uncertainty caused by crises in Ukraine and the Middle East might have a severe influence on the world’s oil and LNG supplies, Baker Hughes CEO Lorenzo Simonelli told the Financial Times this week.
According to Simonelli, increased insecurity could have similar economic implications to the 1973-74 ‘Oil Shock’ catastrophe. During that time, the world saw increasing energy costs and gasoline shortages as a result of an embargo imposed by Arab oil-producing nations in response to Washington’s support for Israel in the Yom Kippur War. Oil prices nearly quadrupled in less than a year, contributing to the elements that contributed to a decade of high inflation and stagflation in the United States throughout the 1970s.
“From a historical context I’ve heard people say, you go back to the oil embargo of 1973 – that being somewhat similar,” Simonelli went on to explain. “But, no, not during my tenure [has the geopolitical climate been this fragile – FT].” From a political standpoint, this is highly fluid.”
The CEO of Baker Hughes stated that the Israel-Hamas conflict had not “changed the outlook” for oil production or demand because Israel is not a major producer of petroleum. However, experts cited by the FT believe that a substantial intervention by Iran might drive up costs. “The base case is that this is hopefully contained within the current situation, as sad as it is, and things continue to be tight.” However, if there is a worsening and deterioration, and deterioration and an escalation of the situation, things will change,” Simonelli argued.
Baker Hughes is a significant supplier of liquefied natural gas equipment, and Simonelli highlighted the company’s extensive LNG contract portfolio. He said that even if the war in Ukraine ended, Russian pipeline gas had little chance of re-emerging as a competitor to LNG in the immediate run. “I think Europe has been shown the difficulties of being so dependent on one energy source,” he added in a statement.
According to Simonelli, a warm winter last year and EU measures to stockpile have helped to avoid a repeat of the 2021 energy crisis, when petrol prices in the region surged above €300 ($320) per kilowatt hour due to the bloc’s decision to shift away from Russian supply.
