Folks, I almost spilled my coffee reading this one. It seems that the Bab al-Mandeb strait, a narrow waterway between Yemen and Djibouti, is looking increasingly shaky as a lifeline for the Middle East’s oil. I mean, who wouldn’t want to disrupt the flow of oil, right? The Iran-backed Houthi rebels have been threatening shipping in the area, trying to open a new front in the war between Tehran and Washington. Because, you know, things weren’t complicated enough already.
The Houthis have captured the port city of Mocha and, according to Yemeni government sources, the strategic Perim Island in the middle of the maritime chokepoint. This has tightened their grip on the shipping route, and it’s no wonder that oil prices are skyrocketing. I mean, who doesn’t love a good game of “let’s see how high we can get oil prices to go”?
The strait has long been a vital artery of global trade, and its importance has only increased since the US-Iran war effectively shut down the nearby Strait of Hormuz. Saudi Arabia has been using the Bab al-Mandeb strait to export millions of barrels of oil, but now that’s looking like a risky proposition. Without this strait, less oil can exit the region, and it will have to take much longer routes, fueling inflation by adding delays and costs onto already-elevated shipping rates. Yeah, because that’s exactly what we need – more inflation.
Richard Bronze, co-founder of Energy Aspects, told CNN that the Bab al-Mandeb had been a lifeline, but losing that lifeline has been a wake-up call for the oil market. He said that oil flows through the strait “collapsed” to about 400,000 barrels per day in August, and it’s now even lower. That’s a pretty significant drop, if you ask me.
To avoid the strait, many oil cargoes must take a far longer and more circuitous route to reach Asia, which is adding about a month’s worth of transit time and pushing up freight costs. Johannes Rauball, senior crude analyst at Kpler, said that a confluence of factors, including Red Sea shipping disruptions, oil production cuts by Saudi Arabia, and Ukrainian strikes on Russian energy infrastructure, had pushed global oil prices past $100 a barrel. Yeah, because that’s not a recipe for disaster or anything.
Oil prices are a key driver of broader inflation, which has ticked up in major economies in recent months. This raises the specter of interest rate hikes, which would feed into higher borrowing costs for consumers. Because, you know, we all love paying more for everything.
Shipping companies are well-practiced in avoiding the Red Sea route, but Peter Sand, chief analyst at freight data firm Xeneta, estimates that the number of vessel transits through Bab al-Mandeb has fallen between 60% and 70%. Transits have also fallen by 46% in the past couple of days following the flare in fighting. Still, he said, “every ship going through… represents a potential target.” Yeah, that’s exactly what I want to hear – that every ship is a potential target.
In conclusion, the situation with the Bab al-Mandeb strait is looking pretty dire, and it’s no wonder that oil prices are skyrocketing. I mean, who doesn’t love a good oil price spike? It’s not like it’s going to affect the global economy or anything. But hey, at least we can all enjoy the thrill of watching oil prices rise and wondering what’s going to happen next. And who knows, maybe we’ll all be driving electric cars soon and won’t have to worry about oil prices at all. Yeah, right.
Armchair patriot. Believes in the free market, cold beer, and that there’s always a guy named George behind every CNN segment.
Former remote-throwing champion turned #1 couch commentator on liberal panic in the media. Born in Texas (or so his mug says), he earned a degree in Fake Newsology & Beer Philosophy from YouTube University.
