Diesel shortages ‘within weeks’ as experts warn energy shock will be WORSE than 1970s – as Reeves begs states not to choke off Britain’s supplies by hoarding oil and gas

Ministers are scrambling to deal with the threat of diesel shortages within weeks as experts warn the energy shock from chaos in the Middle East could be worse than the 1970s.

Keir Starmer and Rachel Reeves are holding crisis talks as fears grow about the looming impact of the Iran war.

The government has admitted it is drawing up contingency plans, despite urging Britons to continue their lives as normal.

Sir Keir will later meet Shell, BP and Norwegian energy company Equinor in Downing Street to assess the situation.

It comes as the RAC said the average cost of a liter of diesel in the UK had risen 27 per cent to 181.2p from 142.4p on February 28, when the war in the Middle East began.

Average petrol prices increased by 14 percent from 132.8 pence to 152.0 pence per liter in the same period.

But with rising pump prices just the tip of the iceberg, warnings about the extent of the crisis in the UK and how long it will last are becoming increasingly clear.

Iran’s closure of the Strait of Hormuz means a ‘long-term reduction in supply’ and the Government should ration consumption, a former governor of the Bank of England warned this morning.

At the same time, a leading maritime expert noted that the world is much more interconnected than it was at the time of the famous energy shock of the 1970s.

They suggested that fertilizer shortages could cause food prices to soar and lead to political unrest in poor countries.

As the Middle East crisis extends into its fifth week:

• Donald Trump said he was considering a military operation to seize Kharg Island, a key part of Iran’s oil export infrastructure;
• Brent Crude oil prices started to rise again after the US President said, ‘Maybe we will get Kharg Island, maybe we won’t’;
• 3,500 more US troops arrive in the Middle East;
• US media reported that the Pentagon was preparing for weeks-long ground operations in Iran;
• Pakistan said it was preparing to host peace talks between the United States and Iran.

CCTV footage shows smoke rising from Israel’s Haifa refinery following an attack by Iran on March 19

Brent Crude oil prices rose again overnight after Donald Trump hinted he might send ground troops to capture a key Iranian island.

Fears have grown that diesel shortages could emerge in the coming weeks as the problem reverberates across supply chains.

This is expected to be worse affected than oil, which is largely supplied by the US and Norway.

Australia announced that the tax on fuel sold at pumps will be halved for three months. This comes after Ireland, Spain and Poland introduced similar measures.

But the UK Government has so far resisted calls for similar action and refused to cancel the tax increase, which was due to come into effect in September.

As well as the Prime Minister’s ’round table’ meeting, the Chancellor will also hold talks with his G7 counterparts later.

He will call on countries to avoid ‘protectionism’ amid concerns that Britain’s energy imports could be overwhelmed by the hoarding of oil and gas stocks.

Ahead of today’s meeting, Sir Keir said: ‘We are bringing together the marine sector, insurance and energy because this is clearly a focus of concern.

‘There is a lot of debate about the Strait of Hormuz and what we can do to open the straits, which is the most effective way to reduce energy prices.

‘I’ll have a Cobra tomorrow, another Cobra, to look at the economic effects of the war and make sure everything we need is in place, everything is properly monitored and inspected.’

When asked whether petrol rationing was being considered, as in other European countries, the Prime Minister insisted on advising drivers that ‘there is no need to do anything other than what is normal’.

Howard Davies, the former deputy governor of the Bank of England, said Covid ‘looks like there will be a V-shaped recession once we get the vaccines sorted’.

“In this case, supply from the Middle East may be restricted for a long period of time,” he told the BBC.

‘So we may have to live with a higher oil price (maybe not $150, but certainly higher than $60 when we started) for quite some time.

‘This requires a plan to increase alternatives and at the same time reduce consumption. ‘It looks like there could be a long-term decline in supply.’

Sir Keir also reiterated that UK forces would not take part in offensive operations in the Gulf. ‘This is not our war and we will not be drawn into it.’

But Kemi Badneoch hit back: ‘He doesn’t need to hold any more meetings, the oil and gas sector has said what it needs.’

According to Downing Street, petrol stations ‘are well stocked across the country and any suggestion otherwise is wrong’.

Asked if the government was planning any shortages, the Prime Minister’s spokesman said: ‘We will always plan to take into account all possibilities.’

He added: ‘To be very clear, as the Prime Minister has said, as the Government has said, and indeed as the industry has said, fuel production and imports continue.

‘The UK benefits from diverse and resilient supply.

‘UK petrol stations are well stocked across the country and any suggestions to the contrary are incorrect.’

Lars Jensen, a former director of shipping giant Maersk, said it appeared “extremely unlikely that there would be a short-term halt in the flow of goods” through the Strait of Hormuz.

Asked what governments could do to mitigate the impact, Mr Jensen said: ‘Not really. There is a lot to be said but little that can be done because at the end of the day it comes down to whether the Iranians want to fire on ships in the Strait of Hormuz.

‘Can we do something about insurance, can we do something about military escorts? ‘It is unlikely that any talk of it will lead to a major change in the willingness of commercial shipping companies to take risks.’

Mr Jensen, who now runs Vespucci Shipping, told the BBC’s Today program the world should brace for the worse because this is ‘just at the beginning of price rises’.

‘We need to keep in mind that much of the oil that was loaded into the Persian Gulf before this crisis is now still reaching some refineries around the world,’ he said.

‘This will end soon. So even if the Strait of Hormuz magically reopens tomorrow, the oil shortages we’re seeing will only get worse.’

He added: ‘The problem again is that the extended supply chain for oil and energy products is measured in months. So, as I said, even if you open the Strait of Hormuz tomorrow, you will feel these high prices for at least the next six months, or even more.

‘And that’s before taking into account the facilities that have been physically destroyed in the Persian Gulf.

‘So, from a global perspective, we need to sit back and start working on the fact that we will face huge energy costs not only while the crisis continues, but also for six to 12 months after it’s over.’

Asked whether the energy shock was comparable to that of the 1970s, which led to a global recession, Mr Jensen said: ‘Comparisons are easy to make.

‘The problem is, that’s not quite true. Because at that time the amount of goods (not only oil, but also fertilizer, aluminum and all kinds of other products) was much less than what we depend on today.

Rachel Reeves will call on countries to avoid ‘protectionism’ amid concerns Britain’s energy imports could be overwhelmed by oil and gas stockpiling

‘So the impact we see today will be much greater than it was in the 70s.

‘I think a lot of people underestimate what the impact is. We talk a lot about oil, what interests me more is fertilizer.

’20-30 percent of the world’s marine fertilizer comes from the Gulf.

‘This will mean food prices will rise rapidly, especially in poor countries, which often tends to destabilize these countries.’

Nigel Green, of financial consultancy deVere Group, warned that the UK was ‘more at risk than most developed economies’ because up to 40 per cent of energy is imported.

‘Energy costs are transmitted quickly through the system. Fuel, transportation, food production and manufacturing are all feeling the impact. “If oil and gas remain high, inflation in the UK will inevitably rise again, and this will happen faster than many currently forecast,” he said.

‘About 35-40 per cent of our energy is imported and we remain dependent on global markets for both raw and refined products. ‘Any disruption to key routes feeds directly into domestic prices and economic stability.’