More refineries 'spread across the globe' needed to avoid disruptions during wars, says expert

And now to the energy crisis. The European Commission is treating the loss of refining capacity as a vulnerability that Europe can no longer afford to ignore. Energy Commissioner Dan Jorgensen warned that the prolonged war in the Middle East should serve as a wake-up call. The EU should ensure that there is an adequate refining capacity at home, he said. This morning came as the prices for crude oil and diesel rose across the board yesterday. Markets reacted to reports that the U.S. is preparing to renew strikes against Iran after the midterm elections. To discuss the latest developments, I'm now joined by Osama Rizvi, Global Markets and Products Strategist at Primary Vision in Lahore. Good morning to you. Good morning to you as well, Stefan. I'm in UAE at the moment right now. Wonderful. So, oil, diesel and gas prices are all up again. Are we witnessing another temporary market panic or the beginning of a much bigger energy crisis? Well, it has never been temporary since the start of the war, actually. Whatever you see right now is a long extension and rather something that has become a structural feature characteristic of the market. Whether the war restarts or not, whether there is an escalation or not, it is going to take some months for the supplies to restore and hence for the refiners to get what they want and hence for the prices to come down and consumers to feel okay. So this is a structural baked-in factor, unfortunately, and we'll have to suffer from it for the next 7 to 12 months, minimum. Why are especially diesel prices rising so sharply? Is there something fundamentally wrong with the global market for refined fuels? Well, diesel, above all the fuels, is really central to the global economy. Up-country movement, down-country movement, agriculture, farmers, all of them food transportation they use diesel as a feedstock right so diesel has low stocks already globally then we discussed it last time last time as well lots of refineries are closing down 1.5 million barrels of refined products going down as well in Europe 10 to 15 percent of refining capacity has been disrupted in the previous few years so all of that had culminated into what is called a diesel crisis and many analysts are i'm also on the verge of declaring this this war is actually a diesel war it's becoming a diesel war and uh that is going to choke the global economy if it gets worse and um Europe seems particularly exposed to the diesel crunch and the comments of um Commissioner Jorgensen is testament to that why is the continent still so vulnerable to disruptions in global fuel supplies well uh interestingly and And Europe has had some issues with the policy making, policy direction, actually, according to myself. The shift or move for renewables, at times we saw that triumphed the realities of the energy security. And hence, what we are seeing right now is that there is a crisis of refining. There is a crisis of diesel production plus diesel reserves. Moving forward, I think it will really benefit not only Europe, but also the world. And this is happening east of Suez, actually, that there needs to be a refining revolution in the world. More refineries spread across the world so that they don't become vulnerable to such geopolitical crisis. And, Osama, if tensions in the Middle East ease tomorrow, how quickly would oil and diesel prices actually fall? I don't think it is going to be very quickly. The crude oil prices, yes, they can fall. We have seen some restoration of both. the flows through Hormuz and the production facilities in the Gulf. So that is one thing. However, that reaching to the refineries will still involve a lot of high transportation costs. $3 of transportation costs before the war. Now it costs around $20 to transport the same oil. So it is going to take three to five months for this to die down and the dust to settle down. So well into next year then? Definitely. All right. Osama Rizvi, as always, thank you for your analysis.