Conflict With Iran Threatens Global Oil Supply and Drives Price Surge
By: Nicolas Leon Guzman
The Strait of Hormuz has long been considered one of the world’s most important energy chokepoints. According to the U.S. Energy Information Administration, roughly one-fifth of the world’s oil supply passes through the narrow waterway between Iran and Oman each day. The Disruption in the Strait of Hormuz has led to oil prices spiking to levels not seen since the start of the war in Ukraine.
For years Iran has threatened the blockade of this region. Since the U.S. and Israel struck Iran and began war, consequences of these actions have been felt worldwide. Iran has put pressure on the global economy by disrupting oil shipments. At least 16 ships have been attacked in the Gulf and Strait of Hormuz since the conflict began, according to Reuters.
The truth is that we have never relied on oil more than right now. The world consumes 100 million barrels of oil per day, and we are at peak oil consumption. The immediate effect we will see from the slow down in oil consumption is in gas prices. According to the New York Post the U.S. has already seen an increase of at least 70 cents at the pump since the war began.
According to iea.org On March 11 the International Energy Agency’s 32 member nations voted unanimously to make 400 barrels of oil available from their reserves to help stabilize the market.
We live in a very truck delivery based economy and with the prices of diesel rising this will make products more expensive as companies historically pass off the cost to the consumer. In an article from the Wall Street Journal they shared that diesel prices for truckers rose a record 96 cents a gallon last week.
Oil complications have already had an effect on air travel. According to an article from Reuters the price of jet fuel has risen faster than crude oil, causing airlines to announce fare hikes, fuel surcharges and capacity cuts. The price of a barrel of jet fuel has risen from $85-90 to $150-200 since the U.S.-Israeli strikes on Iran.
According to the BBC, before the air strikes, the north-west European jet fuel price was $830 per tonne. It has since spiked to more than $1,500.
As tensions continue to escalate in the region, the disruption of oil shipments through the Strait of Hormuz highlights just how fragile the global energy system remains. With transportation, manufacturing and air travel all heavily dependent on petroleum, even small interruptions can ripple across the world economy. If the conflict continues or the Strait becomes further restricted, consumers could see increases in fuel prices, air fares and everyday goods in the months ahead.
