The Oil Crisis Is Far From Over
Greek Energy Pulls In $26B As Europe Scrambles To Replace Russian Gas Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment.
His work has also appeared in The Christian Science… The outline of conditions and topicsfor a negotiated settlement of the U.S.-Iran conflict, called a Memorandum of Understanding (MOU) and signed by both sides last week, in all probability won't prevent the approaching energy cliff.
That cliff will be the result of fast-depleting commercial and strategic inventories of oil and oil products around the world that have acted as buffers in the wake of the suspension of almost all tanker traffic through the Strait of Hormuz during the conflict - tankers believed to carry about 20 percent of the world's daily needs of oil.
As I explained ina previous piece, the world is fast approaching "tank bottoms," that is, the depletion of usable oil and oil products inventory.
When that inventory effectively runs out, there will be a bidding war for oil and oil products to replace the millions of barrels per day that will still be needed but unavailable from inventories as the drama in the Persian Gulf continues.
As of this writing,the Strait of Hormuz has been closed by Iranin response to continuing attacks by Israeli armed forces in Lebanon.
The first provision of the MOU is that hostilities are to cease immediately everywhere, including Lebanon, as a precondition to further negotiations.
Just as important as whether the Strait is open are what each side means by the word "open" and how shipping companies and the insurance firms that insure their tankers understand the risk of transiting the Strait.
According to a frequent unofficial spokesman for the Iranian government, Seyed Marandi, who is a professor of English and Orientalism at the University of Tehran,the Strait will likely be managed in a way to carefully meter trafficat rates far below those seen before the beginning of the war, that is, assuming it does, in fact, reopen.
Although insurance has been available for ships passing through the Strait at costs believed to be five times pre-war rates, thecost of hiring tankers for the journey appears to be skyrocketing, that is, when such tankers are even available.
One of the biggest fears of shippers continues to be that they cannot be certain that ships entering the Persian Gulf will be allowed to come back out, as conditions appear to be changing from day to day.
The many uncertainties are therefore likely to keep many shippers away, and uncertainty works in Iran's favor as Iran's newly minted Persian Gulf Strait Authority can claim the Strait is "open" while also saying it can't force shipping companies to come through.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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