Shutting Down Persian Gulf Oil

Iran has threatened to do that if the world imposes further sanctions, or is attacked by the US or Israel.

What they’re talking about is closing a tiny waterway only 21 miles wide called the Strait of Hormuz (although, the traffic channel itself is only six miles wide). And, 17% of the world’s oil supply flows through there. That represents a third of the world’s seaborne oil supply, and we haven’t even begun to talk about natural gas.

The point is that shutting off a major chunk of the world’s oil and natural gas would have a catastrophic effect on the price of… well, everything. The knock-on effect would be a tremendous increase in the stress on the world financial system, and I just don’t see how it can handle that much stress.

It will collapse, and collapse badly. Most analysts seem to agree that closing the Strait of Hormuz would send the world into a global recession – if not depression.

Yes, the mighty US Fifth Fleet is stationed in Bahrain and would act. But, that’s only about 30 ships including two aircraft carriers against a country with a population of more than 75 million?

Expecting the US Navy to keep the Strait of Hormuz open against determined opposition from Iran is mission impossible. The US might be able to keep the waterway open for days at a time, but with not enough certainty to allow shipping to resume.

And, as I’ve said in another piece, the likelihood of Israel attacking Iran in 2012 is very high.

Be prepared for a VERY rough ride.

Here’s a bit of ‘whistling in the dark’ from Reuters by the US Navy:

U.S. Fifth Fleet says won’t allow Hormuz disruption
Wed Dec 28, 2011 10:27pm GMT

By Parisa Hafezi and Humeyra Pamuk

TEHRAN/DUBAI (Reuters) – The U.S. Fifth Fleet said on Wednesday it would not allow any disruption of traffic in the Strait of Hormuz, after Iran threatened to stop ships moving through the world’s most important oil route.

“Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated,” the Bahrain-based fleet said in an e-mail.

Iran, at loggerheads with the West over its nuclear programme, said on Tuesday it would stop the flow of oil through the Strait of Hormuz in the Gulf if sanctions were imposed on its crude exports.

“Closing the Strait of Hormuz for Iran’s armed forces is really easy … or as Iranians say, it will be easier than drinking a glass of water,” Iran’s navy chief Habibollah Sayyari told Iran’s English-language Press TV on Wednesday.

“But right now, we don’t need to shut it …,” said Sayyari, who is leading 10 days of exercises in the Strait.

Analysts say that Iran could potentially cause havoc in the Strait of Hormuz, a strip of water separating Oman and Iran, which connects the biggest Gulf oil producers, including Saudi Arabia, with the Gulf of Oman and the Arabian Sea. At its narrowest point, it is 21 miles (34 km) across.

Read the whole article here.