TThe tanker market could be severely affected by the effects of the current energy crisis, as countries could accelerate their search for alternative fuels and move away from their heavy reliance on hydrocarbons. In its latest weekly report, shipbroker Gibson said: “With so much short-term uncertainty surrounding the Middle East war, most are focused on the near-term ramifications. However, the conflict will have lasting effects, forcing many countries to re-evaluate their attitudes to energy security in terms of free trade and commodity sources, along with domestic energy production and the fuel mix that fuels their economies. But in a less extreme sense, we have been here before with the Russia-Ukraine war. Here, the loss of energy supplies was the cause. Primarily a European problem, with the conflict ultimately only reducing European import burdens. Ironically, the region has become more dependent on energy in the Middle East. So, as Europe faces its second major energy crisis in four years, and Asia suffers the loss of its most important suppliers, economies around the world will certainly have to make major changes to energy policy to avoid being paralyzed in the same way again.
According to Gibson, “Countries around the world have several options. First, the current crisis could accelerate the shift away from imported hydrocarbons. Given that higher oil and gas prices could ultimately improve the competitiveness of renewables, energy sources such as solar and wind, which have taken a hit over the past 12 months but are rapidly expanding, could see an increase in demand. Electric vehicles are already seeing an increase in demand, with reports of sales rebounding again in the US and Europe after slowdown last year.
Source: Gibson Shipbrokers Limited
“However, in an energy crisis, the extent to which a fuel is green, clean or ethical is less of a concern. Countries across Asia, including India, South Korea, Vietnam, Indonesia and Thailand, have taken steps to increase coal-fired power generation, despite environmental regulations. Likewise, countries are re-evaluating their attitudes towards sanctioned goods, with a ‘needs must’ approach, as demonstrated by the EU’s recent decision to postpone a complete ban on Russian oil. A gas-to-oil conversion is also unlikely.” In previous rises in gas prices, the fuel oil could be used as an alternative to LNG, although the scope for that today is limited by oil supplies, Gibson said. “As countries with inactive nuclear capabilities such as Korea and Japan take steps to accelerate restarts despite some ongoing debate about the technology, in the longer term, the current crisis will enhance the attractiveness of nuclear power.”
“But what about oil and gas? It would be premature to suggest that the current crisis could be the beginning of the end for a sector that has shown remarkable resilience in overcoming any challenge to its dominance of the energy mix. Moreover, the crisis should refocus politicians on security of supply and resilience. Major economies that have allowed refining capacity to shut down, such as the UK, may need to ensure that further shutdowns do not occur to protect domestic refining capacities. Domestic oil production policies are also likely to be reconsidered, with the shipbroker noting that an increasingly hostile world shows that it cannot Relying on existing and relatively new supply chains unconditionally, this further highlights the importance of strategic reserves, which many vulnerable countries will need to consider expanding in the coming years to mitigate future supply shocks.
“So, what might this mean for tankers? Well, that depends on how long the crisis lasts and how deep the economic scars are. In the short to medium term, if all of this ‘explodes’, countries will almost certainly focus on rebuilding strategic reserves. In the case of the US, this could shift exports into storage, while for Asia and Europe, it will likely boost demand for imports. Beyond government stockpiles, commercial storage stocks and refinery stocks will also need to be rebuilt, while strong pent-up demand from China Consumers are also likely to boost demand, provided the crisis does not last so long that the economic damage is severe. In the longer term, structural shifts in energy security could change trade flows and demand levels, although it is too early to know how significant these changes will be.
Nikos Rousanoglou, Global Hellenic Shipping News
