Oil Price Breaches 82 US Dollars per Barrel; Airlangga: Iran Conflict Disrupts Global Supply
A brutal and devastating attack by Israel and the United States against Iran on Saturday, 28 February, shocked the world.
Economic Coordinator Minister Airlangga Hartarto attributed the surge in crude oil prices to 82 US dollars per barrel to escalating geopolitical tensions in the Middle East, which poses a risk to disrupting the global energy supply chain.
According to Airlangga, should Iran become embroiled in open conflict, the first casualty would be global oil supply. Strategic distribution routes such as the Strait of Hormuz risk being affected, not to mention mounting tensions in the Red Sea region.
“If Iran is involved, what will be disrupted is oil supply. Because the Strait of Hormuz could be affected, and then there is the Red Sea. So we will see how far this conflict will extend,” he said in Jakarta on Monday, 2 March.
The government, he continued, has prepared precautionary measures by diversifying oil supply sources from outside the Middle East region. He noted that Pertamina has signed memoranda of understanding with several US energy companies, including Chevron and ExxonMobil, to ensure alternative supply options remain available. Additionally, the government continues to monitor various import options from other countries, including Russia, whilst considering supply availability and feasibility aspects.
Airlangga emphasised that the geopolitical impact extends beyond the energy sector to logistics transportation and tourism. Disruptions to shipping routes and goods distribution could potentially increase global logistics costs. On the other hand, regional security uncertainty may dampen international tourist movements.
Regarding its impact on Indonesia’s exports, he stated that everything depends on the duration and scale of the conflict.
“We are monitoring whether this war will last long or be brief,” he said, referring to the potential impact on trade partner nations in the region such as the United Arab Emirates and Bahrain.
He also did not rule out the possibility of increases in fuel prices should global oil prices continue to rise, as occurred during the Russia-Ukraine conflict. However, he added that supply from the United States is expected to increase and OPEC is also boosting production capacity, which could cushion price pressures. For now, the government continues to observe developments in the global situation before taking further policy measures.