Nermeen Shaikh (37:23)
So the Strait of Hormuz is one of the most important choke points for oil. A choke point being an area during which, if it's closed down, you end up getting a major disruption in the flow of global trade. So the Strait of Hormuz is one. Suez Canal is another one. The Panama Canal is another one. And there are a number of these different choke points all around the world. Now, what's specific about hormones and what's distinctive about it is that it is the choke point where the quantity of oil that goes through is higher than any other commodity that actually flows across the strait. As you just mentioned, about 30% of the global oil flows through that. And part of the reason for that is, of course, that the world's biggest oil producers, some of the biggest oil producers are all sitting around the Persian slash Arabian Gulf. So Iran, Iraq, Kuwait, Saudi Arabia, and Qatar, Abu Dhabi, which all are huge producers of oil in the first place, and then natural gas in the case of Qatar and Iran in the second place. Now, what has been fascinating is that anybody who has one of these apps that you can put on your phone, like maritime traffic or vessel finder, you can actually take a look at the flow of traffic, the flow of vessel traffic, ship traffic through these different seas in the world. And if you zoom in on the Strait of Hormuz, what you'll find is that instead of seeing actually a steady traffic of little, usually pink or green arrows going through which indicate tankers, what you end up seeing are major clusters of ships that are bunched up very near ports where oil is produced and usually put on ships. What that indicates is that basically, for a number of different reasons, and I'm going to go into that in a minute, the flow of ships, the flow of ship traffic has basically come to a halt. Now, the reasons behind this are multifold, of course. There is, number one, that Iran is attacking a number of the ships that are going through. And the way that it is attacking them is through the use of very cheap, either drones or sea mines. And that means that it's basically almost impossible to deal with this particular threat because the drones are produced so extensively in terms of number and they're so inexpensive that they can basically be replenished even if they are destroyed. Also being smaller, they're much harder to target, et cetera, et cetera. So there has been a number of drone attacks against ships carrying oil through the Channel. And so, of course, that scares a lot of carriers, a lot of tankers. The second reason, which I actually think is perhaps even more significant in part because it is actually not something that either the US Or Iran can control, is that the moment something like this happens, the moment that there is a threat against and ships, what you end up having is that insurance brokers, primarily situated in London, but there are, of course, some also in the U.S. china, and in Europe, but really the center for provision of maritime insurance is London at Lloyd's. And the ship brokers end up putting a specific war risk premium on ships. And that means that going from something like 1% of the cost of the hull, meaning the ship's body or cargo, meaning what it's carrying, goes to something like 5%, or it goes from one fraction of 1% to, say, 5%. And so that means that suddenly, instead of paying in the hundreds of thousands for insurance for a supertanker, what you're looking at is millions in insurance, which of course increases the cost of the oil that is trapped. So that's the second reason. The third reason is something that the Houthis noticed when they were blockading the Red Sea in support of the Palestinians, when Israel was committing genocide against Palestinians. And that is that sometimes the threat alone suffices in getting the ships to stop going through or indeed to make declarations that allows for them a degree of protection. So the Houthis, when they had blockaded the sea, had asked that any ships that claimed that they were not touching Israel, meaning they were not delivering to or picking up from Israel, could be allowed to go through the Canal. And so it happened that this Automatic identification system that a lot of ships, all ships carry. It's called the AIs system. And the AIs system indicates what ship is in the vicinity of the system, what it's carrying and what flag it has meaning which, which authorities it responds response to. And so now what we're seeing is that apparently Iran has mentioned that any ship, for example, that is going to China will be let through or any ship that is not coming from one of these allied states, from the US to the US will be, will be allowed through. Of course there is a lot of variation in what kind of thing they have requested or what is being reported. So it's a lot harder see what exactly the air systems are being on these ships. And as I said, we are mostly seeing them clustering and waiting in these locations. One of the main ones being the port of Fujairah, which is actually not in the Persian Gulf, it is in the Gulf of Oman. And oil from Abu Dhabi, which is on the, which is on the Persian Gulf side, is shipped to Fujairah through a pipeline. So we're seeing a cluster of ships near Fuji Gyra, Iran of course also attacked for Gyra port. And then we're seeing a cluster of ships near Ras El Fan, which is the main gas production and gas lifting port in Qatar. And the third is of course around the oil fields of Saudi Arabia, a little bit further up the Persian Gulf. And so these clusters of ships are waiting there and hoping to be able to at some point pick up oil to, to be carried out. But we're not seeing much of that flow anywhere at all.
