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Threatening the oil market was a step too far by the Houthis
With each passing day, the global shipping crisis intensifies due to repeated attacks by Houthi rebels from Yemen on vessels in and around the Bab el-Mandeb strait. These attacks, backed by Iran, are prompting major international shipping companies to announce a halt to navigation in the Red Sea, opting instead for the longer route around Africa’s Cape of Good Hope.
Just on Monday, British Petroleum, a giant in the energy sector, declared that its tankers would not sail in the Red Sea until further notice – a statement that serves as a warning signal to energy markets worldwide and ironically brings the potential solution to the crisis under closer scrutiny.
For the global energy market, the significance of the Suez Canal, Bab el-Mandeb and the Red Sea is paramount. The majority of oil and natural gas exports from Gulf countries to Europe and North America pass through these vital waterways, both by sea and through pipelines. In the first half of the current year, shipments of oil through these routes constituted approximately 12% of the total globally traded oil at sea. Likewise, liquefied natural gas shipments through these pathways represented 8% of the global trade in this commodity, according to data published by the U.S. Energy Information Administration.
The Suez Canal, connecting the Red Sea to the Mediterranean, is not the sole means of transporting oil from the Red Sea. The Sumed or Suez-Mediterranean pipeline, established by several Arab countries in 1974, serves as an alternative for oil transportation outside the Suez Canal. Spanning a submarine-like structure in the Gulf of Suez and extending through Egyptian territory to the Mediterranean port city of Alexandria, this pipeline can handle up to 2.5 million barrels per day. However, its capacity largely depends on the entry of tankers into the Red Sea.
In other words, more oil barrels pass through the Red Sea than through Bab el-Mandeb and the Suez Canal combined. The situation is different for liquefied natural gas, as the minimal amounts of this commodity in the Red Sea.
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