Shell CEO Warns of Prolonged Energy Crisis from Middle East Conflict

Shell chief executive Wael Sawan has predicted that the global energy crisis triggered by the Iran war and the closure of the Strait of Hormuz will have a long recovery period. The conflict, sparked by US and Israeli attacks on Iran in late February, has led to retaliatory strikes on Middle Eastern energy infrastructure, production shut-ins, and the effective closure of the Strait of Hormuz, pushing commodity prices to multi-year highs.

Impact on Global Oil Supply and Demand

Sawan stated that the world has "dug itself a hole of close to a billion barrels of crude shortage," either from locked-in or unproduced barrels, and that this shortage is deepening daily. He noted that the crisis is already affecting the global refining complex. The International Energy Agency (IEA) has slashed its annual oil demand growth forecast, expecting crude demand to fall by 80,000 barrels per day this year, with a second-quarter decline of 1.5 million barrels per day—the sharpest since the Covid-19 pandemic.

Regional Demand Curtailment and Jet Fuel Impact

Sawan revealed that the global impact varies by region, but Shell is already seeing about a 5% demand reduction across the jet fuel and airline industry, along with fuel switching. He noted resilience in many parts of the world but questioned how this will evolve in the coming months.

Operational Challenges and Repairs

Regarding Shell's damaged Pearl GTL facility in Qatar, Sawan confirmed that long lead item requests have been placed and a repair plan is in place, though no further details were provided. He visited the plant two weeks ago and noted that all debris from the Iranian missile attack had been cleared. Sawan also confirmed that Shell has "a few" vessels trapped in the Persian Gulf, unable to pass the Strait of Hormuz, but declined to specify numbers. He has been in contact with crew members and stated the company will wait until it is safe to traverse the strait.

Financial Performance

Shell's first-quarter results showed adjusted earnings of $6.9 billion, exceeding analyst forecasts of $6.36 billion and representing a more than 20% increase from $5.6 billion in the same period last year, highlighting the strength of its trading division.