The war in the Middle East is entering a new phase, as the blows to energy infrastructure threaten to cause a chain effect on the global economy. With the South Pars field in the crosshairs, combined with the closure of the Strait of Hormuz, the fear of a spike in fuel prices is intensifying. Indicative of the situation is that the International Energy Agency announced that it will release 411.9 million barrels on the market, with the aim of containing oil prices. At the same time, Cyprus is facing a new wave of high prices in energy, electricity and basic goods.
Energy expert Charles Ellinas, speaking to Filenews, said that if the attacks and strikes on energy facilities continue, then the situation will become particularly dangerous. If Israel strikes other South Pars facilities, then there will be a serious deterioration of the situation."
He stressed that the US President is making contradictory statements, as on the one hand he says that he will dismantle South Pars and on the other hand he gives orders to Israel to stop the strikes on natural gas facilities. "If they stop, then there will be a slight recovery. However, we do not know exactly what is happening, as it appears that Netanyahu is acting without full consultation with the US. The American services are monitoring Israel's actions," he said.
He underlined that South Pars is one of the largest natural gas fields in the world. "It provides 80%-85% of Iran's electricity. With the decision to hit South Pars, the country's electricity supply is essentially affected," he explained.
Asked about the impact on fuel prices in Cyprus, he replied that "there will definitely be increases". As he said, so far no significant price increases have been recorded. "The Strait of Hormuz is closed and about 20% of the world's oil traffic passes through there. In Cyprus, increases have been recorded, however, we have not yet seen the real impact, as there were oil reserves in warehouses," he said.
He noted that when stocks run out, prices will rise further. "If the price of Brent remains at 105 dollars, then gasoline in Cyprus can reach €1.65 per liter," he said. At the same time, he explained that Cyprus is supplied with fuel mainly from Greece and Israel, while the price of gasoline from Greece depends directly on the price of Brent.
Increases in electricity and products
Regarding the possibility of increases in other products, he said that this is inevitable. "Not only gasoline is affected, but also diesel, which is used to generate electricity. Diesel has risen much more than Brent," he noted.
Indicatively, he mentioned that before the war the price of Brent was at $70 and diesel at $100 per barrel, while today Brent is around $100 and diesel at $155. "This will lead to an increase in the price of electricity and, by extension, to price increases in all products."
At the same time, he noted that 30%-40% of urea and ammonia, key raw materials for fertilizers, were traded from the Strait of Hormuz, pointing out that the impact on agriculture will be significant and the industry will face problems.
What measures can the Government take?
Mr. Ellinas then referred to measures that could mitigate the impact on Cyprus. As he pointed out, 88% of the fuels used by the country for transport and electricity production are imported fossil fuels, which makes it completely dependent on international markets.
"To reduce prices, the Government can take measures that are in its hands, such as imposing a cap on fuel taxation. Today the tax on gasoline is 42 cents and could be reduced," he said, adding that there is fiscal space due to revenues from the energy sector.
Referring to gas station owners and importers, he noted that they had profits even when prices were at €1.35. "They could contain prices and not benefit from the crisis by increasing their profits. If all these measures are taken, the price could be reduced by about 15 cents," he said.
He underlined, however, that there is no question of energy adequacy in Cyprus. "There will be energy, but at higher prices. If projects such as the introduction of natural gas, the electrical interconnection and the upgrade of the network had progressed in previous years, the impact would have been smaller. They did not happen, as a result of which the crisis affects us strongly," he noted.
In conclusion, he warned that if Israel does not stop strikes on gas and oil facilities, the price of Brent could reach $150. "In such a scenario, the price of gasoline in Cyprus could reach €2.15 per liter."
