In world oil supply news, Iran has threatened to shut down oil shipments through the Straight of Hormuz, if a possible oil embargo is placed on the regime by some Western nations (such as France, Germany and the UK).
The Straight of Hormuz is the passage for a third of the world’s ocean-going oil trade, and Iran is the world’s fifth largest crude oil exporter. Iran supplies European nations with 450,000 barrels a day, which is about 18% of Iran’s exports. China buys the most Iranian crude oil, and is reportedly not a supporter of “emotionally charged actions” against Iran over its alleged nuclear ambitions.
The situation has propelled oil prices well above $100 a barrel. As I write, global benchmark Brent Crude is sitting at $109.27, and West Texas Intermediate (WTI) is $101.33.
The threat of the blockade came from Mohammad Reza Rahimi, Iran’s vice-president. Only days ago, Iran staged a naval war exercise in the straight. Rahimi was reported to have told the official Iranian news agency,
“If they [the West] impose sanctions on Iran’s oil exports, then not even one drop of oil can flow through the Strait of Hormuz,”
Foreign ministers from the Europan Union are expected to discuss the embargo further at the end of January. On a usual day, 13-15 oil tankers move through the straight. The U.S. navy patrols the waters to ensure the safe passage of oil, and it’s arguable whether Iran could shut down the straight, at least not without the possibility of military action. Clearly, the whole situation could become highly volatile, putting further pressure on oil prices in the coming year.
To my mind, this situation only serves to yet again highlight the urgency and importance of putting far more effort and resources into finding cleaner and renewable replacements for the world’s finite oil resources. The chief of the International Energy Agency has previously said that peak oil was most probably back in 2006, so until we find a viable, scalable and clean alternative to oil, these sorts of issues are not going to go away.
How long do you think it will be before a viable alternative for oil is achieved?
Image CC licensed by Lars Christopher Nøttaasen: Oil barrels