by Xinhua writer Gao Wencheng
LONDON, May 27 (Xinhua) -- Industry experts said Tuesday that even under the most optimistic scenario, in which the United States and Iran quickly reach an agreement to reopen the Strait of Hormuz, global energy markets would still need roughly six months to return to normal conditions.
The predictions were made on the sidelines of the release of the 2025 Oil and Gas Industry Development Report by the Economics & Technology Research Institute of China National Petroleum Corporation (CNPC ETRI), a leading energy think tank.
The event, held in London, was attended by around 150 representatives from domestic and international institutions.
WIDESPREAD SHOCKWAVE
In an interview with Xinhua, Dave Ernsberger, president of S&P Global Energy, said the ongoing crisis surrounding the Strait of Hormuz has placed unprecedented stress on global oil and natural gas markets.
"The current conflict around the Strait of Hormuz has surprised everybody, because we've gone from a situation where it was impossible to imagine the Strait being closed to a world where today it's almost impossible to imagine how the Strait can reopen," he said.
Ernsberger noted that roughly 20 percent of global oil and gas supplies that previously transited through the Strait have been disrupted, while global stockpiles are being depleted at historically high rates as markets attempt to rebalance.
He explained that the prolonged closure has had far-reaching consequences across the energy supply chain. Crude oil production has stopped in some areas, part of the liquefied natural gas production has been suspended, and refined oil production at many Gulf refineries has also been interrupted.
"When the Strait of Hormuz was closed for just a couple of days, production could rebound very quickly and shipping could resume very quickly," he said. "But now that the Strait has been closed for almost three months, restarting production will take much longer."
According to his analysis, restarting these operations could take "two to three, maybe even four months," with oil wells in countries such as Kuwait, Iraq, the United Arab Emirates and Saudi Arabia requiring significant time to return to production after extended shutdowns.
Wang Jing, director of the Oil Market Research Department under CNPC ETRI, said while interpreting the report that some refining and petrochemical facilities in the Middle East have already been damaged during the conflict and will require time to repair.
Meanwhile, several ongoing expansion projects have been delayed, creating uncertainty over future investment in regional oil production capacity, she added.
SLOW RECOVERY
Ernsberger said there are currently two possible scenarios for the future trajectory of global energy markets.
"The best-case scenario is that a deal is reached soon and the Strait reopens smoothly," he said. "The worst-case scenario is that the conflict goes on for many, many months to come, maybe even into next year. The reality will probably fall somewhere between those two scenarios."
Even under the most optimistic scenario, he said oil prices are expected to remain well above 100 U.S. dollars per barrel for at least six months after the Strait reopens.
"It's going to take a high price to incentivize production to come back to the market," he said.
Simon Henry, a veteran industry expert and former Shell CFO, shared a similar assessment. He told Xinhua that even if Washington and Tehran quickly reach a deal, global oil and gas supply chains may still need six to 12 months to normalize.
"There has been some damage to facilities, particularly in Qatar and the Emirates," Henry said. "Downstream facilities, gas-to-liquids plants, refining, petrochemicals and fertilizer facilities may take a little longer."
At the same time, Henry emphasized that energy prices often react ahead of actual shifts in supply and demand.
"Once it's clear that supply is coming back, and if there's been any demand destruction with demand coming down, then the price will come down in advance," he said. "The market does look forward to supply-demand changes."
"There is no doubt that this year's oil prices will be dominated by geopolitical conflict. Much will depend on how quickly the Strait of Hormuz returns to normal operations," said Wu Mouyuan, vice president of CNPC ETRI.
LONG-TERM IMPLICATIONS
Regarding the long-term implications of the crisis, "perhaps energy security concerns now outweigh everything else. Supply chains are valuing resilience as much as efficiency," said Wei Fang, president of CNPC Europe & North America Limited.
Likewise, Ernsberger said the conflict has fundamentally reshaped discussions about energy security.
"In the past, conversations around renewable energy were focused more on sustainability, climate effects and introducing diversity of supply into local economies," he said. "Now, if you look at countries like India and countries in Western Europe, there is much closer examination being done of the security structures around energy supplies."
He believes the crisis could lead to significantly greater investment in renewable and alternative energy sources, as governments, policymakers and consumers seek to avoid similar disruptions in the future.
Henry also said trends already underway on the demand side may accelerate, including the adoption of electric vehicles and the expansion of solar and wind energy where those technologies remain competitive.
"China has a huge role to play there," said Henry, who once served as an independent director of PetroChina.
"China is a technology leader in some very significant areas of energy, whether it's vehicles, solar panels or critical minerals processing. What China chooses to do, and what it can do will be hugely influential," he noted.
He added that China's perspectives on global energy markets have become increasingly important because the country is now the world's largest market for many major commodities.
"It's very difficult to run any commodities business today without understanding China, and mostly working with China," Henry said. ■
