The Financial Times published a report on how fuel shortages are set to become much more acute due to the war in Iran. Only now are the last oil tankers to depart the Strait of Hormuz arriving at refineries in Europe and North America, where the Middle Eastern crude is processed into usable fuel. Within a few days, those regular deliveries will cease.
It seems odd that tankers leaving the Persian Gulf on February 28 reach their destinations in mid-April. That is because oil tankers are gargantuan things, cruising at an average speed of just 12 to 15 miles per hour (10 to 13 knots) — about as fast as a mediocre cyclist, and no, I don’t mean motor.
Consequently, a good share of the rise in fuel prices on this side of the Atlantic has been anticipatory of impending shortfalls. Europe and especially Asia have been missing oil deliveries from the Persian Gulf for longer. See how that is going:
Forties Blend, a North Sea grade, soared close to $149 a barrel on Monday, above the highs reached on the eve of the 2008 financial crisis, according to LSEG data. The uncommonly large premium over the price of Brent crude futures, which are trading at about $100 a barrel, reflects refiners’ desperation to secure supplies.
Here we Americans are, complaining about $100 oil, which translates into $4 gasoline. We ain’t seen nothing yet. People in France and Germany are paying twice that amount to fill up — those of them who have cars, anyway. Vietnam has told people to stop coming into work. Asia is rationing jet fuel. Europe might get there by June. Real energy shortages are an economic cancer.
One could argue that Americans are protected because we didn’t buy very much oil from the Gulf states. But oil is a global commodity whose price is set on a global market. Refineries in the United States will have to start bidding against refineries around the world for a supply that’s one-fifth smaller than it was two months ago, and you can bet they’ll be paying more. To remain solvent, they will pass that premium on to consumers.
Bottom line: We’re all going to spend a lot more on fuel for a while. If governments don’t allow fuel prices to work, we’ll get 1970s-style gas lines instead. When President Trump says the Strait of Hormuz’s closure is solely Europe’s problem to handle, don’t believe him.