The Iran war will change the global energy market in these ways, oil executives say

The world’s energy system will change dramatically as a result of the Iran war, executives of key oil and gas companies told investors on their earnings calls two weeks ago.

Iran’s blockade of the Strait of Hormuz has resulted in the loss of nearly a billion barrels of oil, and the shortage is worsening every day the sea route remains closed.

The disruption showed the weakness of the global energy system, said Olivier Le Peuch, CEO of a major oil services company. SLB.

“It will bring about a significant structural change in all energy,” said Lorenzo Simonelli, CEO of Baker Hughesrival of SLB.

Governments and industry will prioritize energy security, said Le Peuch and Simonelli. “It’s not just a talking point anymore,” said Jeffrey Miller, CEO of Halliburtonanother major oil services company.

Investments in oil exploration and production will increase as a result, CEOs say. Low-carbon solutions such as geothermal, nuclear and the modern grid will continue to see investment, Simonelli said.

“It’s not just about increasing the supply of energy,” said the CEO of Baker Hughes. “It’s about a strong and consistent energy infrastructure and a highly redundant, diversified infrastructure, reducing reliance on any one large asset.”

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The closure of Hormuz has emphasized the dependence of mainly Asian economies in the Middle East on the export of crude oil and liquefied natural gas.

“Obviously, people are going to reevaluate their energy security and how they make sure that, going forward, they don’t have the same exposure,” Exxon Mobil CEO Darren Woods said.

Governments will aim to decentralize their powers, oil service chiefs say. They will have to rebuild the oil that has been disrupted because of the war, said the administration.

“There will be a rebuilding of the world’s inventory above historical levels to ensure that energy security is at the forefront,” Simonelli said.

US crude oil will be more important than ever to help the world maintain energy security, said Kaes Van’t Hof, CEO of Diamondback Powerone of the largest producers of shale oil in the US. US crude exports reached record highs during the war.

The oil market is now “very tight” due to supply disruptions, Miller said. The market has changed from what is expected of a surplus this year to a severe deficit, he said.

This will support higher oil prices after the war is over, Le Peuch said. Higher rates will encourage investment in offshore and offshore opportunities in Africa, the Americas and Asia, he said.

“Africa [represents] one of the most compelling long-term opportunities, with a significant base of undeveloped oil and gas resources,” said SLB’s CEO. “We expect the portfolio allocation to shift accordingly in this region over time.”