Wired reports:

On Thursday, Israel launched a series of strikes on various oil and gas facilities in the region, most notably the South Pars gas field, the world’s biggest natural gas field, which is jointly controlled by Iran and Qatar. Iran retaliated with counterstrikes, including on the world’s largest oil export facility in Qatar. Oil prices temporarily shot up to nearly $120 a barrel.

These strikes appear to have damaged infrastructure that’s crucial to the world’s fossil fuel supply. Qatar produces around 20 percent of the world’s liquefied natural gas (LNG) supply. The CEO of QatarEnergy, the state-owned oil and gas company, told Reuters that strikes had taken out 17 percent of its capacity for the next five years, and that the company will have to declare force majeure on contracts with countries in Europe and Asia due to the damage.

“Once you get into the point where real long-term damage is happening, it’s not going to be so easily reversible,” says Wald. “Once the conflict ends, we could still see a period of sustained higher oil prices simply because of the loss of production.”

If the war drags on and energy facilities keep being targeted, it’s hard to overstate how devastating its ripple effects could be to the global economy. The head of the International Energy Agency told the Financial Times on Friday that the war represented the greatest threat to global energy supply “in history,” and said that financial markets were underestimating the impact of the conflict.

Johnston points out that the amount of oil and gas that could be taken off the table is roughly the same amount of demand that was shed during the initial global shutdown in 2020 from the pandemic.

“If the strait does not reopen, people are like, ‘Is this recessionary?’ I’m like, ‘No, it’s depressionary.’ This will be so, so, so, so, so bad,” he says. “We’re talking about Covid-level demand loss, no cars on the road, no planes in the sky, but with no pandemic.” [Continue reading…]