Oil crisis deepens as Yemen threatens second strait closure | Sunrise

[00:00:00]On to something completely different, there are fresh warnings this morning that the real oil shock from the Iran war might only just be the beginning.

[00:00:07]The latest threat comes from Yemen's Iran-backed Houthi rebels, who have vowed to block another of the world's critical shipping routes. It's called the Bab el-Mandeb Strait.

[00:00:18]>> Yeah, the move comes just days after Iran closed the Strait of Hormuz again, and now it's estimated the blocking of both straits would choke off almost 30% of global oil and gas shipments. And for more, we're joined now by Kevin Morrison, energy analyst with the Institute for Energy Economics and Financial and Analyst. Good morning to you. So, these two vital straits have now been blocked off. What is that going to mean for us here?

[00:00:44]>> Well, we don't directly import straight from the Middle East, but most of the oil that that that goes through through the Middle East goes to refineries in Asia, and that's where we import pretty much 90% of all our oil needs. So, it is important.

[00:00:57]Um and so, it it's it's narrowing the the options where we can actually source the oil because what will be allowed through is is at the moment we've got the the Houthis which control this area in the northeast of Yemen. Um and so, they're threatening to to block any Saudi oil, which is the majority of the oil that comes through there. And that was a backup option when the Strait of Hormuz was was was closed, you see.

[00:01:24]>> Okay. So, we've been we've we've learned all about the Strait of Hormuz in the last few months. So, this one's here.

[00:01:29]>> Yeah.

[00:01:30]>> Um the Bab el-Mandeb Strait, which a lot of Australians would think, "Well, what on Earth?" Right?

[00:01:35]>> It's new to a lot of us.

[00:01:38]Um how big a decision is that? How big an impact is that on Australia? The flow-on effect in the next few months.

[00:01:47]>> It it it's big because what the Saudis were doing, they've got a pipeline, the East-West pipeline. So, because the strait was closed here, they were then sending all their oil down here.

[00:01:55]>> Oh, and it was getting out down here.

[00:01:56]>> So, it was >> out down here. Now, that option is cut off. The only oil that's actually going to come through here is actually Russian oil because um so the Russia is able to to we've got uh the Suez Canal. So, oil was still able to travel through there. So, the Saudis can send oil out from the the the uh the port of Yanbu um and then send up through the uh through the Suez and then right round to Africa, but that's going to add 4 weeks.

[00:02:21]So, if it's going to go to Singapore >> to cost as well.

[00:02:24]>> Adds to cost uh and so therefore so let's just say here's an example. So, the oil from Saudi Arabia through uh uh Yanbu uh port would go down to Singapore. That normally takes about 3 weeks, but if you're going to add another 4 weeks, it's going to take 7 weeks.

[00:02:39]>> I think we're going to have a look at some of these new routes. So, talk us through these new new routes here as well of that we've got for these shipments now coming through. Here we are.

[00:02:47]>> Yeah.

[00:02:47]>> Okay, so here we go. Talk us through this.

[00:02:49]>> Okay. So, uh Saudis could still send the the oil out uh through through the Yanbu port and then send it up north to the through the Suez. Now, the problem with that is that the Suez is is a very narrow waterway.

[00:03:03]It's only about 200 m and so you can't send the big uh oil tankers through there. These tankers carry about 2 million 2 million barrels of oil, uh but there is a pipeline that actually goes that that that um goes along the side of the Suez Canal.

[00:03:17]So, you can send about 2 and 1/2 million barrels through there each day.

[00:03:20]>> Okay.

[00:03:20]>> But you can you can only have like a Suezmax or you the very big tankers, you could just uh you you you've got to lighten up the ballast there.

[00:03:29]>> So, even though they can get up and out, it's not even as many and as big as ships going or and they have to take the longer route.

[00:03:37]>> Yeah. So, it's going to be less and it's going to take longer, so it's going to be more more more expensive.

[00:03:42]>> So, Kevin, is this all good news then for Russia because obviously they had been slapped with sanctions from many countries around the world now.

[00:03:50]Is it Is this going to be good news for the sale of their oil and their energy production?

[00:03:53]>> Well, yes and no, because uh bearing in mind there's still conflict going on in Russia and the Ukrainians are able to to penetrate deeper and further. And so there is so much so that the Russians actually stopped the export of diesel.

[00:04:07]Now that's important because Australia is actually the world's biggest diesel importer. So even though we don't buy any any diesel straight from Russia, we will be competing with the people that do buy and that's the that's Turkey, Brazil and China.

[00:04:22]>> Okay, and also on the long route around the four to six week long route if they can get out.

[00:04:27]>> Yeah.

[00:04:28]>> Haven't we got pirates down here? Does that still happen?

[00:04:30]>> Well, yes, but I mean it's been a while since I've heard any oil tankers being being being pirated.

[00:04:39]So it it's it's it's a possible threat, but you know, you've still got pirates off here as well as Somalia coast. So it's it's yeah, it's a threat, but it's not going to stop most of the oil traffic.

[00:04:51]>> Okay.

[00:04:52]>> All right. Well, Kevin, thanks for your time this morning and your insights.

[00:04:54]>> Thank you.

[00:04:54]>> Cheers.