Oil Supply Crisis: A new crisis is looming over the world. Due to increasing tension in West Asia, energy supply is going to reduce again. The Strait of Hormuz has once again been closed after Saudi Arabia attacked the drones. Due to this, danger is looming over the world.
The importance of these routes is high because through them large quantities of oil and gas reach different parts of the world. If obstruction on these routes continues for a long time, its impact will not be limited to the oil market only. There may be increased pressure on the prices of petrol-diesel, LPG, freight and many everyday items.
Why are these three paths important?
Sea routes like Hormuz and Bab al-Mandeb play a big role in the world’s energy trade. Through these, crude oil and petroleum products from the Gulf region reach different markets of the world.
At the same time, Saudi Arabia’s pipeline system also plays an important role in transporting oil from its eastern production areas to the ports on the west coast. From there, oil is sent to international markets through tankers.
That is, if sea routes as well as alternative pipeline routes are affected, the pressure on global oil supply may increase.
What will change due to the closure of Saudi pipeline?
News of Saudi Arabia temporarily shutting down a major crude oil pipeline following drone attacks has increased market concerns. The pipeline helps transport oil from the eastern part of Saudi Arabia to the westward port of Yanbu.
Oil from Yanbu is sent to international markets via sea route. Due to disruption of this route, there is a possibility of increased pressure on some other markets including Europe.
Its direct impact for India may be limited, but the problem may become bigger if there is prolonged disruption on other alternative routes along the already affected Hormuz Strait.
Why is Bab al-Mandeb important for India?
The Bab el-Mandeb Strait connects the Red Sea to the Gulf of Aden and further to the Arabian Sea. It is also a very important route for maritime trade between Europe and Asia.
There have been security concerns regarding this sea route in the past due to the activities of Houthi rebels in Yemen. If the movement of ships on this route is affected on a large scale, then the supply of oil as well as other goods may also be affected.
This route is also important for India because it plays a role in energy products coming from West Asia and many maritime trade routes leading to Europe.
What can be the impact on petrol, diesel and LPG in India?
If the international supply of oil remains disrupted for a long time, there may be upward pressure on crude oil prices. This may impact the prices of petrol, diesel and LPG in future. Apart from this, expensive crude oil can also increase the transportation cost. This will increase the cost of transporting goods from one place to another and may put pressure on inflation.
However, this does not mean that a big jump in the prices of petrol, diesel or LPG is certain in India immediately. The actual impact will depend on how long the supply disruption lasts and what level crude oil prices remain in the international market.
If oil becomes expensive, it will affect the stock market too (Oil Supply Crisis)
The continuous increase in crude oil prices can also affect the economy and the stock market. Expensive fuel can increase production and transportation costs for companies. This may put pressure on the profits of some companies.
On the other hand, if inflation increases and people’s purchasing power is affected, the pace of the economy may also be affected. The biggest concern at the moment is how long the tension in West Asia will last and how long will the situation on these important energy routes return to normal.