SCOTT DETROW, HOST:
Today, Iranian forces attacked commercial ships in the Strait of Hormuz on the 12th day since Israel and the United States launched strikes on Iran. The strait sits between Iran and Oman and connects the Persian Gulf to the Indian Ocean. It is a critical route for global trade. Roughly a fifth of the world's oil supply passes through the Strait of Hormuz every day, along with shipments of fuel, fertilizer and other goods from Gulf states.
All of this has giant global economic stakes, so we are going to take a few minutes to better understand what the conflict and the threats of a longer war mean for global shipping. We're joined by Erik Broekhuizen. He's the head of tanker research and consulting at Poten & Partners, a brokerage and maritime consulting firm specializing in energy transportation. Erik, welcome to ALL THINGS CONSIDERED.
ERIK BROEKHUIZEN: Thanks for having me.
DETROW: Just how anxious is your field right now?
BROEKHUIZEN: It's a 12 on the scale of one to 10.
DETROW: Yeah. Is there any precedent for this in the last several decades or even century of shipping?
BROEKHUIZEN: No. No, the Strait of Hormuz was never closed before, the way it has been since the conflict started. So this is unprecedented. There's obviously other, if you will, black-swan events that have happened and rocked our industry, like COVID and the Ukrainian invasion by Russia, but that did not disrupt such a large portion of global oil supply.
DETROW: Iran now seems to be targeting commercial vessels with strikes, possibly mines. From the perspective of the shipping industry, what does that mean for tanker traffic moving through the area? Are ships just not even trying at this point?
BROEKHUIZEN: No. No, I think the transits through the Strait of Hormuz have virtually stopped. So prior to the conflict, there's probably, like, 80 to 100 ships would go through the straits every day. So basically, 50 going in, 50 coming out. So you have to look at it as like the Strait of Hormuz at its narrowest point is about 24, 25 miles wide. But there basically are two shipping lanes. That's how ships go in and out. So 50 go in one lane up and the other 50 go in the other lane down out of the strait. Since the conflict started, only a handful of ships have gone in or out.
DETROW: President Trump again today encouraged tankers to start making that trip again. He has floated the idea of using the United States Navy to escort tankers. He's also floated insurance guarantees for shipping companies. Are either of those useful? Do you think shipping companies will take him up on either of those offers if they're legitimate offers?
BROEKHUIZEN: Let's take it one by one. I think there is a little misconception around the insurance because it's not that insurance is not available for ships going in or out of the Strait of Hormuz. The insurance is just very expensive. But the reason that ship owners are not going to take their ship through Hormuz is the safety of the ship and the crew. It's not because they cannot get insurance. Convoys or naval ships moving with the ships through the straits, I think there is probably limited appetite for that at this point. I think we probably have to see a couple of ships do that and pass safely without incident before the shipping industry will take President Trump up on his offer. At this point, we have not seen a lot of interest in that.
DETROW: Given all of these factors that you're laying out, how much longer can this war go on before the entire industry - before the bottom falls out or before it becomes this something that's incredibly hard to recover from? Or is that already happening?
BROEKHUIZEN: I think what you will see in the coming days or weeks, if it lasts that long, is that A, you will see strategic petroleum reserve releases, which I think the IEA already announced today to release 400 million barrels. So 400 million barrels is a - that's a lot of oil, but that's - obviously it's not going to be released on Day 1. That will go over a period of time. I think it's about 2 to 3 million barrels per day is probably where you sort of tap out how much they can release on a daily basis. So that is, of course, helpful, but if you lose, like, 15 million barrels per day, 2 million barrels per day is not going to solve the problem. So oil prices will continue to go up. You'll see refineries shutting in production. You'll see fuel switching. Some of the refinery - or some of the countries that are reliant on oil or LNG...
DETROW: LNG - liquefied natural gas.
BROEKHUIZEN: Yeah. Twenty percent of the global LNG trade comes out of the Middle East, primarily from Qatar. So there's a lot of countries that rely on Middle Eastern LNG, so they have to switch to other fuels or shut in capacity. And you might see, ultimately, higher prices having an impact on global oil demand. So the price will drive demand down until this situation has been resolved.
DETROW: That is Erik Broekhuizen, head of tanker research and consulting at Poten & Partners. Thank you so much for explaining this to us.
BROEKHUIZEN: You're welcome. Transcript provided by NPR, Copyright NPR.
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