Securing the sealanes of the super highway

Securing the sealanes of the super highway

Safe, secure and continuous supplies of energy are critical to modern society, providing the lifeblood to the global economy. The securitization of energy for heat, light and transportation affirms the strategic role petroleum plays, fuelling growth and development.

The global energy system is large and complex, requiring enormous amounts of embedded capital. In order to maintain energy supply and security, it is paramount that the energy system and supply chain is secure and stable. Energy security needs to be thought of not just in terms of energy supply itself, but also in terms of safeguarding the entire supply chain.

Mistakenly, threats to the physical supply chain are not fully evaluated when assessing potential bottlenecks and supply disruptions. As over 60 per cent of the world’s oil and natural gas is transported by sea annually, it is imperative that the sea-lanes remain clear and safe for tankers and their crew.

Every day hundreds of tankers sail through the sea-lanes of the super highway, delivering energy to international markets. It is clearly in the interest of all participants in the global economy to ensure that vessels carrying crude can pass peacefully without being impeded upon by piracy or terrorism, or is it?

Although the price of Brent remains under $60 today, any disruption or interference to a strategic waterway would directly result in a substantial increase in the price of oil. A low vs high oil price can help or hinder nations depending on their position as producers or consumers.

The most sensitive and strategic waterways can be broken down into seven individual sea-lanes of which 20 per cent of international oil trade pass through on a daily basis. These narrow sea-lanes are referred to as ‘choke points’. One of the most important choke points is the Strait of Hormuz, illustrated above.

Any physical disruption to any of these sea-lanes would almost inevitably require a direct naval response. In the event of a terrorist attack or geopolitical blockade, whose responsibility is it to lead a response? Who has the will and commitment to undertake such a feat?

Historically, the United States Navy have reigned supreme, actively patrolling and controlling the world’s oceans. The US Navy is the largest and most well equipped, followed by the navies of China, Russia, the United Kingdom and Japan, respectively.

If the Strait of Hormuz were to become impassable, would Washington immediately intercede? If this question had been raised at any point between 1970 and 2014, analysts would have automatically postulated the view that “absolutely they will.” However, today this cannot be said with the same degree of certainty.

The pieces on the chessboard have moved

Due to increased demand and growth from China and India, the shift of global energy trade has been re-orientated away from the Atlantic-Basin to the Asia-Pacific region. This coupled with the substantial increase in domestic oil production in the United States, the US are considerably less reliant on imports from the Persian Gulf.

Beijing, Delhi and Tokyo are highly dependent upon oil cargos from the Gulf, consequently, if an incident were to occur in the Strait of Hormuz, panic would soon begin to spread in Government buildings in these three Capital Cities.

Arguably, there would be greater emphasis on Beijing and Delhi as compared to Washington to lead a response, as any incident would directly result in higher oil prices and consequently manufacturing costs in Asia would rise.

If an incident were to occur at any of the seven choke points, how would the major navies respond? Would they collaborate or pursue their own individual National interests? The answers to these questions may well reveal who and where the geo-political conflicts will be won and lost in the future.

One thing is absolutely certain; the sea remains a super highway of immense strategic significance.

About Author

Nicholas Rodgers

Nicholas is the Editor-in-chief of The Insider and Chief Analyst and founder of Human Energy Group.