Closing the Strait of Hormuz?

via Iran Threatens to Block Oil in Reply to Sanctions –

WASHINGTON — A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.

Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.

The first sanctions against Iraq, in 2006, did nothing to slow their uranium enrichment program.  Although Iran claims the program is solely for peaceful purposes, Western nations are fearful of a ‘nuclear Iran.’  The new sanctions would hit India and China, as well as Europe, very hard, since they buy most of Iran’s oil.  Supposedly the slack could be picked up by Saudi Arabia, but many analysts don’t think that’s possible.  Undoubtedly the price of oil would rise.

Some economists question whether reducing Iran’s oil exports without moving the price of oil is feasible, even if the market is given signals about alternative supplies. Already, analysts at investment banks are warning of the possibility of rising gasoline prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by the European Union.

Rising oil prices could set back the economic recovery, and cause more economic woes worldwide.  But an even worse outcome is possible – can Iran really block the Strait of Hormuz?  What will our response be if they try?

Bowling for Dollars

What explains this distribution?  What economic impacts will this have?

Correlation or Causation?

The proof is in the graph!

Correlation or Causation? – Businessweek.

Chokepoints and Oil Transport

After our lesson last week on chokepoints, I read this post today on the World Geography Blog.  It got me to thinking about how much oil goes through these places, so I Googled and found this:

World Oil Transit Chokepoints Energy Data, Statistics and Analysis – Oil, Gas, Electricity, Coal.

Chokepoints are narrow channels along widely used global sea routes, some so narrow that restrictions are placed on the size of vessel that can navigate through them. They are a critical part of global energy security due to the high volume of oil traded through their narrow straits.

Because the Panama locks are so small not much oil passes through the canal, but some straits are not much wider.  This is the Bosporus, on the way from the Black Sea to the Mediterranean.

World Oil Transit Chokepoints Energy Data, Statistics and Analysis - Oil, Gas, Electricity, Coal

The article, from the US Energy Information Administration (whoever has heard of them?) covers all the oil chokepoints worldwide, and discusses the implications of their potential closure.

Ho Chi Minh City

h/t to Environmental Geography

The theme of Movement, an elaborate ballet of traffic in the former Saigon, Vietnam

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