The war involving the United States, Israel, and Iran has led to a substantial increase in global energy import costs, with an additional $330 billion incurred between March and August. This surge occurred despite oil and gas prices rising less than initially feared. Crude oil accounted for the largest share of this extra cost, totaling $164.1 billion, followed by diesel and gasoil at $73.8 billion, and gasoline at $35.7 billion. Liquefied natural gas (LNG) imports were $38 billion more expensive, and jet fuel added an extra $20 billion to the bill.
The European Union experienced the most significant financial impact, with its energy import bill rising by $78 billion over the six-month period. This is attributed to the EU's heavy reliance on foreign oil and gas, especially U.S. crude and LNG, following sanctions on Russian hydrocarbons and limited domestic production. China and India also faced substantial additional costs, at $35 billion and $22 billion respectively. India's net additional cost was $14.4 billion, equivalent to 0.38% of its GDP, representing a loss of approximately 1.4 days of national income.
Prices for LNG in Asia averaged 75% higher than pre-war expectations, while in Europe, LNG prices were 60% higher. These elevated prices are expected to continue, potentially increasing further due to anticipated winter shortages in Europe and the need for Asian countries to stock up. Oil prices are also considerably higher than pre-war levels, and fuel costs have seen the most significant increase. Approximately one-fifth of the Middle East's refining capacity, totaling 9.6 million barrels daily, has been disrupted, compounded by damage to Russian refineries. This has severely constrained global refining capacity and fuel output, suggesting that higher energy bills for importers could persist even after the war concludes.
Despite the significant financial burden, there was a small offset from renewable energy sources. Wind and solar power, along with other low-carbon energy sources, collectively saved importers $36 billion during the March to August period. This highlights the potential for clean energy to cushion future price shocks. Meanwhile, the U.S. economy has largely demonstrated resilience due to ample domestic natural gas production and maximized LNG export terminals, which has mitigated the urgency to transition away from fossil fuels for many consumers and policymakers.
