Brent crude this morning is at $80 a barrel, up 12pc since the US attack on Iran. The Islamic Republic pumps more than 4 million barrels of oil per day, close to 5pc of global crude output.
As geopolitical tensions have escalated, the price of oil has now risen 35pc over the last two months. With Tehran retaliating across the Middle East, and the region accounting for a third of total crude production and a fifth of all natural gas output, global energy supplies are now under significant threat.
Fossil fuels still matter. For all the talk of net zero and the growing share of renewables in electricity generation, oil and gas remain crucial to the global economy, including the UK.
Oil remains vital across numerous sectors, not least transportation – think trucks, aviation and shipping – and the manufacturing of industrial chemicals, plastics and asphalt among other hugely important materials. Gas still generates around a quarter of the world’s electricity and is used to make fertiliser – sorely needed to grow enough to feed a fast-expanding global population.
Back in 2005, oil accounted for 37pc of the world’s primary energy consumption, with gas generating 23pc. The same numbers are now 31pc and 24pc respectively – still hugely significant, with the world’s reliance on natural gas as an energy source actually up over the last 20 years.
The International Monetary Fund’s “rule of thumb” is that a 10pc increase in oil prices raises inflation in advanced economies by about 0.4 percentage points. That would push inflation in Britain, still up at 3.0pc during the twelve months to January, even further above the Bank of England’s 2pc target.
