Updated ,first published
Governments have failed to inform their citizens of the scale of economic carnage being wrought by the Iran war, International Energy Agency chief Fatih Birol warned Australians, describing the current fuel crisis as worse than the combined impacts of the three biggest energy shocks in modern history.
Albanese on Monday acknowledged in his most pessimistic remarks to date that Australians would continue to cop “economic aftershocks” long after the conflict ends, as he declared that the decades of global economic growth enjoyed since World War II are over.
“Even if we were to wake up tomorrow to the welcome news that this conflict was over, there would still be a long economic tail to reckon with,” Albanese said in an address to the Minerals Council annual dinner on Monday night.
“All of this underlines a simple reality. The stable, predictable world of ever-expanding free trade is gone – and it will not be returning any time soon.”
Birol said his bleak message of the economic impacts from Iran closure of the Strait of Hormuz was needed because “the depth was not very understood”.
“This crisis, as things stand now, is two oil crises and one gas crisis, put all together,” he said in an address to the National Press Club in Canberra on Monday.
“Households need to be better informed about the magnitude of the challenge we are facing. I think they’d be better prepared if they understood what kind of challenge we are facing today.”
Birol cited the 1973 oil crisis when Arab nations refused to supply oil to the US, as well as the 1979 Iranian revolution, which cut off around 5 per cent of global oil supply and the 2022 gas crunch caused by Russia’s invasion of Ukraine.
“The amount of oil we lost is equal to two oil price shocks in the 70s, which led the world to recession,” Birol said.
He said the current block on fertiliser shipments from the Middle East, which produces about 30 per cent of global supply, would drive up food prices.
Birol is executive director of the IEA, an influential agency that advises on global energy security and coordinates strategic oil reserve releases. He met with Energy Minister Chris Bowen and Prime Minister Anthony Albanese on Monday, and confirmed that the IEA was discussing with the agency’s 32 member countries a second release of oil to tackle the crisis.
He warned that Asian nations, particularly developing countries with weaker economies, will be among the hardest hit by the unique combinations of challenges caused by the Iran war.
“Again, I go back to 1970s. Many of the emerging and developing countries in [Asia], also in Latin America, went into spiral of international foreign debt, which became a major problem for those countries [for] years and years to come,” Birol said.
The IEA last week called on countries to consider drastic fuel-saving measures, such as encouraging citizens to work from home, drive at reduced speeds and cut back on flights.
Australia has so far resisted these measures, even as Bowen told parliament on Monday that 37 service stations in NSW are out of fuel, 47 in Queensland have run dry and 109 in Victoria had at least one type of fuel unavailable.
Bowen warned of a continued “bumpy” supply of fuel to Australia in coming weeks, but insisted imports remain secure as the government works on contingency plans as the blockade in the Strait of Hormuz enters its third week.
The resources sector has been the mainstay of Australia’s export revenue for decades and Albanese acknowledged the unprecedented turmoil to the sector’s supply chains as well its supplies of liquid fuel.
Australia imports about 90 per cent of its liquid fuels, and Albanese has said he would use Australia’s gas exports as leverage to ensure Asian nations maintain their exports to the country.
Albanese announced on Monday that he had struck an agreement with Singaporean Prime Minister Lawrence Wong, to support the flow of LNG and petroleum oils, including diesel, between the two countries. Singapore’s refineries are a major liquid fuel supplier to Australia.
The government is being pressured by crossbench MPs, trade unions and energy experts to impose a new tax on gas exporters’ windfall profits, as gas shipments from the Middle East to Asia are due to run out within days after Qatar’s gas fields were attacked by missiles and its ships blockaded in the Strait.
Birol declined to weigh in on Australia’s response to the crisis, but said it is important a fair share of profit is collected by governments on behalf of their citizens, who are “the real owners of the resource endowment”.
However, he said countries should be wary of taxation changes that may undermine critical export industries.
“Energy investors are like butterflies. When they are scared, they fly away.”
Birol said the oil crunch would spur a dramatic increase in renewable energy investment, as countries seek to increase their energy security by reducing their reliance on imported fossil fuels.
“I expect one of the responses to this crisis will be acceleration of renewables, not only because they are helping to reduce the emissions, but they are also homegrown domestic energy source.”
Birol said 40 per cent of the world’s nuclear power plants were built in response to the 1970s oil shocks and backed the technology as a crucial electricity source for many countries. But he said Australia did not need nuclear power but should be proud of its renewable energy rollout.
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.