Motorists in Australia are being urged to fill up their vehicles amid fears that rising global crude oil prices could soon push up fuel costs at the bowser.
Concerns have intensified following U.S. and Israeli strikes on Iran, raising the possibility of retaliatory action in the Middle East that could disrupt oil flows through the Strait of Hormuz. The narrow waterway, heavily dependent upon for global energy supplies, is partly controlled by Iran, which holds the world’s third-largest proven oil reserves.
Andy Lipow, president of Lipow Oil Associates, told CNN that the worst-case scenario for the oil market would involve an attack on Saudi oil infrastructure followed by a complete closure of the Strait of Hormuz. He warned that oil prices could rise by as much as US$5 per barrel, if not more.
A European Union official told Reuters that vessels in the region had received VHF transmissions from Iran’s Revolutionary Guards stating that no ships were allowed to pass through the strait. However, Iran has not formally confirmed such an order.
Shipping data showed that at least 150 tankers, including crude oil and liquefied natural gas (LNG) vessels, dropped anchor in Gulf waters beyond the Strait of Hormuz, while dozens more remained stationary on the opposite side of the chokepoint. Several tanker owners, oil majors and trading houses have suspended shipments via the strait following the attacks and Tehran’s claim that navigation had been closed.
The Joint Maritime Information Center, led by the U.S. Navy, said no formal international suspension of traffic had been announced by recognized maritime authorities. However, it warned mariners to expect increased naval presence, heightened security measures, possible VHF hailing, congestion near anchorage areas and volatility in insurance markets.
The Strait of Hormuz, located between the Persian Gulf and the Gulf of Oman, is just 33.7 kilometres wide at its narrowest point. It serves as the only sea route for transporting crude oil from the oil-rich Persian Gulf to global markets. According to the U.S. Energy Information Administration, about 20 million barrels of oil — roughly one-fifth of daily global production — pass through the strait each day, making it a critical global oil chokepoint.
A closure of the strait would significantly affect Asian economies. The Energy Information Administration estimates that 84 per cent of crude oil and 83 per cent of LNG passing through the strait last year were destined for Asian markets. China, the largest buyer of Iranian oil, imported 5.4 million barrels per day through the strait in the first quarter of this year, while India and South Korea imported 2.1 million and 1.7 million barrels per day, respectively. By comparison, the United States and Europe imported just 400,000 and 500,000 barrels per day, respectively, during the same period.
