Vitol executive warns West is ‘asleep at the wheel’ on oil supply crisis

(Bloomberg) – Vitol’s top executive in the Middle East said that many Western governments still aren’t reckoning with the oil supply crunch that’s rippling around the world due to the blockade of the Strait of Hormuz.

“In Europe and I think in the U.S., everyone is kind of asleep at the wheel and just carrying on life as normal,” Tom Baker, a board member at Vitol, said at S&P Global’s Middle East Petroleum & Gas Conference in London.

While crude has risen near $100 a barrel, prices and volatility of oil products such as gasoline, diesel and jet fuel have seen bigger spikes. That’s led to a drop in demand in a number of developing countries, particularly in Asia and parts of Africa.

Vitol estimates global demand destruction at around 4 MMbpd, with countries delaying purchases in the hope that a resolution to the Iran war will bring down prices.

So far, consumption has dropped less in richer countries, where the loss of supply from the Middle East is being replaced to some extent by strategic stockpiles.

“I’ve even spoken to some of the government guys in the UK and they’re aware that there’s a crisis, but they don’t want to panic people by saying ‘change your spending habits, do things differently’,” Baker said, adding that U.S. demand hadn’t fallen much. 

People are still driving, so it’s “maybe not fully impacted on gasoline yet.”

Traders are looking at how the situation could pan out if the Strait of Hormuz remains blocked for much longer. One key factor to consider is China, whose cuts in imports have helped ease the impact of the war on global oil markets. 

“China won’t indefinitely not import 5 MMbpd; and at some point when they need those barrels, the price needs to go higher and the only solver is to kill demand,” Baker said. “But are we at that inflection point or are we close? Maybe.”