Seeing a barrel of oil at $200 has gone from being an apocalyptic scenario to an option on the table. The mirage of recent days, with Brent relaxing around 90 dollars after the initial scare of 120, does not deceive the experts because the physical reality of the market is broken.
As detailed in The Energy Newspaperconsulting firm Wood Mackenzie estimates that the market will need prices of at least $150 in the coming weeks to force a rebalancing of demand. At the $200 mark, his conclusion is devastating: it is no longer crazy.
It was already being announced. From the Iranian military command itself Khatam al-Anbiya, its spokesman Ebrahim Zolfaqari has issued a direct warning: the world must “prepare for a barrel of oil to reach $200.” To put this figure in perspective, an opinion column Financial Times Remember that the historical peak of $147 reached in 2008 would be equivalent to about $222 today if we adjust it for current inflation.
The International Energy Agency (IEA) has been blunt in his last reportcalling the current scenario “the largest supply disruption in the history of the world oil market.” The physical blockade of the Strait of Hormuz has taken 20 million barrels a day off the boardan impact that multiplies by five the losses caused by the historic Arab embargo of 1973.
How is it possible? In his first official message, Iran’s new supreme leader, Mojtaba Khamenei, confirmed that the lever of closing the Strait of Hormuz will continue to be used against its adversaries and attacks are becoming a tangible reality. As has been advanced oil price, Iranian drones have hit storage tanks in the port of Salalah, in Oman, and two oil tankers (the Vishnu and the Zefyros) caught fire in Iraqi waters after being attacked by underwater drones.
The lack of maritime exit is collapsing the logistics chain from its origin. Iraq have been forced to close wells and reduce their production by 70% simply because they have run out of physical space in their storage tanks. Paradoxically, Iran’s oil heart, Kharg Island—which channels 90% of its exports—remains intact; However, a direct attack by the US or Israel on this facility would fire automatically a barrel above $150.
But we have strategic reserves. And yes, the 32 member countries of the IEA have agreed to a historic and unprecedented release of 400 million barrels of their emergency reserves. According to data from the IEA monthly reportobserved global inventories are high and amount to 8.21 billion barrels.
However, this desperate release just buy timebut it does not solve the immense physical blockage. According to Financial Times, oil demand is extremely inelastic; That is to say, it is very difficult for people to stop consuming it suddenly even if it is more expensive. Therefore, a real shortage of just 2% in global supply is capable of triggering massive price increases, neutralizing the reserve shield.
So what’s going to happen? The military solution at sea seems very limited. According to Lloyd’s Listestablishing a Western naval escort system would limit tanker traffic to less than 10% of its usual volume, as convoys would be restricted to groups of 5 to 10 commercial vessels per transit. Added to this is that the biggest current threatsea mines scattered in a bottleneck just 34 kilometers wide.
Faced with this maritime plug, the main escape valve is the pipes in the desert. Saudi Arabia is operating against the clock its East-West (Petroline) pipeline to divert up to 5 million barrels per day to the port of Yanbu on the Red Sea, completely bypassing Iran. The United Arab Emirates supports the maneuver by injecting almost 2 million additional barrels through its pipeline to Fujairah. As confirmed Financial Times, The Saudi route has successfully managed to register a record of exports through its western ports of 5.9 million barrels per day on March 9.
An unprecedented escalation. To this complex logistical puzzle we must add the political variable in Washington, which does not seem to be in a hurry to force a de-escalation that will alleviate the markets. Through their social networksDonald Trump has made it clear that the cost of energy is not his main concern right now. “The United States is the largest oil producer in the world, by far, so when prices go up, we make a lot of money,” the president posted. His absolute priority, he explained, is to stop Iran, an objective to which he attaches “much greater interest and importance.” With these words, the current administration publicly assumes that it prefers to deal with rising gasoline prices rather than loosen the strategic noose on Tehran.
In short, the desert pipelines and strategic reserves act as a tourniquet, but they do not stop the bleeding. As long as diplomacy remains stagnant, Washington prioritizes the fall of the Iranian regime over lowering crude oil prices, and the Hormuz Pass remains a 34-kilometer-wide minefield, the world economy will continue to dry up. In this scenario, a barrel reaching $200 is not a catastrophic prediction; It is simply the next logical step if ships remain unable to sail.
Image | Photo by Chris LeBoutillier on Unsplash
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