Fuel Prices: Will the Middle East Conflict Affect the European Economy?

The escalation in the Middle East is affecting global markets, with several stock indices and individual shares falling, while oil prices continue to rise.

Speaking on BNT's programme “Denyat Zapochva” (The Day Begins) on March 9, Svetoslav Benchev, chairman of the Bulgarian Petroleum and Gas Association, said:

“In my view, nothing can save the situation. Oil is at $116 per barrel. If Iran starts targeting oil infrastructure, it will terrify the market. We’ve already seen that the Americans struck Iranian facilities as well.”

Benchev warned that recovering the market and stabilising prices will take time.

“Qatar, for example, said it would take them between two weeks and two months to restore production levels they had before the Middle East conflict began. The situation in Iraq and Kuwait is somewhat different, as there is still no damaged infrastructure there, unlike in Qatar.

It will also depend on how quickly the Strait of Hormuz can be cleared, how fast tankers can move, and how soon the shortage of shipments can be addressed. I estimate it will take roughly three weeks to a month before the market stabilises and returns to levels we’ve previously seen.”

photo by BNT

Svetoslav Benchev, chairman of the Bulgarian Petroleum and Gas Association, stressed that Europe imports around 56–60% of its natural gas from the United States and is largely unprepared for the current crisis, meaning the heaviest losses are likely to be borne by European countries.

“For several years – not just two or three, but seven or eight – Europe has been unprepared for situations like this. Unfortunately, we always pay the price for what happens elsewhere in the world,” Benchev said.

Svetoslav Benchev, chairman of the Bulgarian Petroleum and Gas Association, highlighted that fuel storage levels in Europe are below the critical minimum, at around 33–37%, and warned of likely increases in fuel prices.

“If this trend continues with prices at $115–116 per barrel, we can expect fuel prices to rise in the coming days. There’s simply no way around it. We are not isolated islands from the global markets. The situation is extremely unusual.

We have never experienced a scenario where supply is effectively shut off, creating shortages on international markets. You may have noticed that diesel prices are rising faster than petrol, which is completely normal, because diesel is the fuel in highest demand for transporting goods. We are really in an extraordinary situation.”

eo