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Petrol, Diesel Prices May Rise as Hormuz Route Faces Disruption
Crude Oil Prices Hike: Will the escalating military conflict in West Asia make petrol and diesel more expensive worldwide? The turmoil in the oil market following the US and Israeli attacks has raised this question. The looming threat over the Strait of Hormuz has deepened a major crisis for global energy supplies.
The situation in West Asia has shaken the international energy market. After the attack by the US and Israel on Iran and Iran’s retaliation, the price of crude oil surged in international markets. When the markets opened, traders were concerned that the oil from West Asia could be affected, and this could further increase prices.
West Texas Intermediate (WTI), the light and sweet crude oil produced in the US, reached nearly $72 per barrel, up nearly 8 percent from Friday's $67. Experts believe that if the situation worsens, this surge could continue.
The Strait of Hormuz is being the most severely impacted by tensions in West Asia. This narrow sea route, the gateway to the Persian Gulf, carries approximately 15 million barrels of crude oil daily, representing approximately 20 percent of global oil supplies. This route carries oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates, and Iran to the global market.
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Recent reports of attacks on two ships transiting this route have further heightened concerns. According to experts, if traffic is restricted in this waterway, the export capacity of many countries will be affected, leading to a rise in global petrol and diesel prices.
In an effort to provide relief amid the tensions, eight countries in the OPEC+ group have announced increased crude oil production. An additional 206,000 barrels per day will be produced from April. Countries increasing production include Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman. However, energy analysts say that simply increasing production will not be enough unless export routes are fully secured.
Iran exports approximately 1.6 million barrels of oil per day, a large portion of which goes to China. If exports are disrupted, major importing countries like China may be forced to seek alternative sources, potentially disrupting the global demand-supply balance. Energy experts believe that the impact of this West Asia oil supply crisis will not be limited to the oil market alone, but could also impact the global economy, inflation, and stock markets.
