The entire planet has been paralyzed in a funnel of salt water just 33 kilometers wide. With the escalation of war in the Middle East, headlines from around the world warn that the price of crude oil has surpassed the psychological barrier of $100registering record increases of 36% in a single week. However, the price is only the fever; the real illness is much more serious.
To understand the magnitude of this crisis, we must stop looking at the stock price and start looking at the physical barrels that are missing. Today’s fundamental and structural problem is scarcity: the market is drying up. Overnight, we face the disappearance of some 20 million barrels a day. It is a logistical catastrophe five times greater than the one we experienced in the historic crisis of 1973.
The 20 million barrel hole. According to data collected by The Kobeissi Letter and confirmed by Goldman Sachsthis blockade takes about 20 million barrels a day off the board (approximately 20% of world consumption). To put it in perspective, this supply shock is the largest in history and is equivalent to adding, at once, the losses caused by the Iranian Revolution (5.5 million), the Yom Kippur War (4.5 million), the invasion of Kuwait (4.3 million), the Iran-Iraq War (4 million) and the invasion of Ukraine (2 million).
We are not facing a reserve crisis, but rather an absolute logistical collapse. As we have explained in Xataka, just open the platform Marine Traffic to see a swarm of some 240 immobilized vessels, including at least 40 supertankers (VLCCs) loaded with two million barrels each. The chaos is not only physical, it is also electronic as there is severe interference in the tracking systems (AIS), showing ghost ships located inland due to signal hacking. The fear of sailing is justified, tanker traffic in Hormuz has fallen by 90% and freight rates for supertankers have skyrocketed by 600%.
The domino effect. Unable to take ships out to sea, onshore storage tanks have been filled to the brim. Iraq has been the first major physical victim of this plug. The data of Bloomberg They give the actual measurement of the cap. Iraq has had to plummet its production by 70%, falling from 4.3 to just 1.3 million barrels per day. The shock wave has already reached the United Arab Emirates and Kuwait, which have begun to close wells for a very basic reason advance by Financial Times. They have simply run out of physical space to store the crude oil.
Given this scenario, OPEC+ promised to inject an additional 206,000 barrels per day. However, analyst John Kemp explains in Financial Times that this is a mirage: almost all of the cartel’s surplus capacity is inside of the Persian Gulf. If the ships cannot leave, that crude oil does not exist for the rest of the world. Nor are alternative pipelines a panacea. Javier Blas, columnist of Bloombergexplains that Saudi Arabia and the Emirates have pipelines to bypass Hormuz to the Red Sea, but a report from Goldman Sachs warns that the actual diversion capacity It is only 0.9 million barrels per day compared to the theoretical 6.5 million.
The shortage is already hitting critical sectors. As my colleague Alberto de la Torre warned about an unprecedented crisis in aviation fuel (jet fuel), whose price in Asia reached an anomalous record of $225.44 per barrel. It is estimated that 40% of the jet fuel arriving in Europe passes through Hormuz. Since airports have very small storage tanks, the supply chain is stretched. Airlines such as WizzAir already foresee losses of 50 million euros due to this extra cost alone.
Panic has reached governments. According to reports Financial Timesthe finance ministers of the G7 and the International Energy Agency (IEA) are preparing an emergency meeting to release between 300 and 400 million barrels of their joint strategic reserves. It is a desperate measure to stop the global inflationary impact. President Donald Trump, facing US gas stations at $3.45 a gallon, downplayed the blow on his social media, stating that short-term prices are “a very small price to pay for peace and security.”
China’s master plan against the US “Donroe Doctrine”. While the West panics, in Beijing there is the calm of someone who has done his homework. The US strategy was to suffocate the cheap crude oil (Iran and Venezuela) that the Chinese industry feeds on, in what some analysts call the “Donroe Doctrine” (the US attempt to control up to 30% of the world’s reserves together with Guyana and Venezuela).
But China was anticipated. Last year it spent $10 billion absorbing excess global crude oil, building up strategic reserves for 96 days. Today it has 166 million barrels floating safely off its coasts. In addition, it has triggered the purchase of Russian and Saudi crude oil, and has accelerated its true national shield: the electrical transition. With a 50% market share in electric vehicles and 430 renewable gigawatts installed in one year, Beijing demonstrates that, unlike a ship in Hormuz, sunlight cannot be blocked by the US Fifth Fleet.
ANDThe ghost of 1973. Comparisons with the 1973 Arab oil embargo are inevitable but misleading. In ’73, the cut was 4.5 million barrels; Today the hole is 20 million.
The economic damage suffered by the world was seven times greater than the value of the missing oil, all because of the collective panic that paralyzed investment and consumption. Today, however, the physical scenario is so extreme that the structural blow is guaranteedWhether there is panic or not. The only current advantage is that the United States is today the largest producer in the world and its economy depends much less on crude oil than it did 50 years ago, which gives it a certain shield.
The tyranny of geography. If the ships do not sail, signatures like S&P Global Energy They predict a brutal “demand destruction”: unaffordable prices that will force the world to forcibly stop consuming crude oil.
In the age of artificial intelligence and algorithmic trading, the global economy has just discovered that it remains hostage to physical geography. Sanctions are designed in offices in Washington and Brussels, but the reality of supply is dictated by a few ship captains who, out of pure survival instinct, refuse to set sail. Until it is safe to cross those 33 kilometers of water in the Persian Gulf, the price on Wall Street screens will be the least of it. What matters is that, day by day, the world is drying up.
Image | freepik
GIPHY App Key not set. Please check settings