The oil and gas industry has to take notice when any disruption of supply is even mooted. Last week, Iran did that and more in threatening to close the Strait of Hormuz.
"If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz," said Iran's Vice-President Mohammad Reza Rahimi.
"We have no desire for hostilities or violence…but the West doesn't want to go back on its plan" to impose sanctions, he said. "The enemies will only drop their plots when we put them back in their place."
Such a threat can never be dismissed out of hand. After all, how many mines does it take to close a waterway, especially one as narrow as the Strait of Hormuz?
Two miles wide
According to the US Energy Information Administration, at its narrowest point, the strait is 21 miles wide, but the width of the shipping lane in either direction is only 2 miles, separated by a 2-mile buffer zone.
That's not a large area to be closed, and it would not take much to do it. The threat alone is enough to send oil prices rising, a point underscored last week when Iran issued its warning.
Indeed, fueled by worries over supply disruptions and naval exercises by Iran in the strait, Brent crude gained 35¢, rising to $108.31/bbl in Europe, and US crude was up by 28¢ to $99.96/bbl.
Although Iranian war games occur periodically, the timing of these particular exercises is seen as a show of strength as the US and Europe prepare to impose further sanctions on Iran's oil and financial sectors.
Consumers worried
Needless to say, the prospect of a supply disruption is more than a little daunting to consumers like the US and its allies, given what would happen to world supplies prices. But other suppliers are no less worried.
Indeed, to play down the prospect of a supply disruption imposed by any closure of the Strait, other suppliers in the region have already discussed the possibility of activating alternate routes.
They include boosting the use of the 745-mile, 4.8 million b/d Petroline, a pipeline crossing from eastern Saudi Arabia to the Red Sea. Another is the 1.5 million b/d line from Abu Dhabi to Fujairah.
Then, too, there are the 1.65 million b/d Iraqi Pipeline across Saudi Arabia and the 500,000 b/d Tapline to Lebanon, which are both inactive, according to the EIA.
"We are concerned about Iran's move and there are informal talks between ministers about it…but there is no need to take any action until something serious happens," a senior gulf oil official said.
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