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World’s oil supply in vulnerable position with prices set to soar

Political instability and recent rebel attacks in the Middle East has left the world’s oil supply dangerously uncertain, suggests new research from ESCP Europe.

According to Professor of Energy Economics Mamdouh G. Salameh, we are all at risk of steep oil price increases.

“The recent attack on two oil tankers each carrying 1 million barrels of oil in the Strait of Bab al-Mandeb at the southern tip of Yemen and Saudi Arabia’s suspension of some oil shipments, have demonstrated just how easy it is to disrupt global oil traffic.

“The four key world chokepoints of oil, including the Straits of Hormuz, Bab al-Mandeb, Malacca and the Suez Canal account for two-thirds of global oil trade traffic, with over 44 million barrels of oil travelling through these chokepoints every day.

“Any hint of a potential outage at these chokepoints can add a few dollars per barrel as a risk premium. This is extremely worrying considering Iran have just threatened to close the entire Strait of Hormuz as a result of US sanctions, a closure like this could send oil prices far above $150 a barrel”.

The world is extremely dependent on the stability of these chokepoints and the researchers warn that any unrest could have disastrous consequences, for example, the average consumer will be paying more for their petrol and everyday goods as a knock-on effect.

This was posted in Bdaily's Members' News section by ESCP Business School .