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World Oil Users Will Be Left High And Dry If Iran Seals Off Hormuz Water-Passage
Source: ALBA
Strategic oil reserves will be needed if Iran seeks to close the choke point Strait of Hormuz because overland pipelines can only carry one-third of the oil supplies that move through the waterway, an Arab energy group has warned.
The Tehran regime has threatened to block the 112-mile strait, the only way in and out of the Persian Gulf, if the United States attacks over the Iranian nuclear program.
The reduction in oil exports from the gulf, as well as a complete halt to natural gas shipments, an Iranian closure, even one lasting a few weeks, will batter the global economy by sending energy prices soaring unless steps are taken to ensure that the shortfall is covered.
Shutting down Hormuz, the Arab Petroleum Investment Corp. observed, “should prompt the International Energy Agency to act alone to ensure the oil market remains well supplied by using its strategic stockpiles.”
“In the event of a crisis, Saudi Arabia’s spare production capacity would obviously be useless,” it said.
Thus, the International Energy Agency, the industrialized world’s energy watchdog, “would have to shoulder the burden of dealing with the aftermath alone,” the report noted.
“Balancing the market would be even more challenging as 85 percent of the crude oil and 50 percent of the LNG being shipped through Hormuz is bound eastward where key non-IEA members such as China, India, Indonesia and Thailand may not have built up sufficient strategic petroleum stocks.”
Apicorp, based in Saudi Arabia, is an affiliate of the Organization of Arab Petroleum Exporting Countries.
Over the last year or two, Saudi Arabia and the United Arab Emirates, the biggest oil producers among the Arab monarchies on the gulf’s western shore, have been building or upgrading pipelines to bypass the narrow strait that lies at the southern end of the gulf.
At present, these states, plus Iran and Iraq, ship some 17 million barrels of oil a day aboard tankers through the strait. Apicorp says that’s nearly 31 percent of the global oil trade.
At the same time, some 2 million barrels per day of liquefied natural gas — about 33 percent of the world’s LNG trade — also moves through the strait. But the pipelines that bypass the strait through Saudi Arabia, the United Arab Emirates and Iraq can carry only half the seaborne trade — about 8.5 million bpd.
