BASF CEO Warns of Potential Oil Price Shock Amid Iran Conflict

Frankfurt/Berlin — The chief executive of Germany's BASF, the world's largest chemical producer, on Tuesday warned of a new oil price shock due to the US war in Iran.

"With oil, we are now slowly reaching the point where reserves are gradually being depleted," Markus Kamieth said at the International Club of Frankfurt Business Journalists (ICFW).

If the Strait of Hormuz does not open soon, he said, there could be "another price shock in the second half of the year, affecting both oil and refined products".

The war in Iran, which was launched by the US and Israel at the end of February, has caused oil prices on the world market to rise sharply, fuelling inflation.

At the same time, Kamieth said he wasn't worried about gas supplies, noting that China, as a huge consumer of gas and liquefied natural gas, switches to coal as soon as the gas price rises. This reduces gas demand in the Far East, which takes pressure off the market, the BASF chief executive said.

Kamieth said the chemical industry is probably experiencing its most difficult period in 25 years. The pressure on energy-intensive production is high, he said, citing significant CO2 taxes levied in Europe on ammonia.

Nevertheless, Kamieth said he believes Europe will still have a strong chemical industry in 10 years’ time, even though it might look different by then.

BASF has been struggling for years with expensive energy in Germany, overcapacity on the global market and competition from China.

The company recently announced that fixed costs in its core business are to be cut by up to 20%, accompanied by further job cuts, as Kamieth looks to refocus BASF more strongly on its core business.

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