If Iran attacked tankers in the Strait of Hormuz:
- Damaged tankers that need repairs could not immediately transport oil; however, substitute tankers can transport oil for the damaged tankers. While there would likely be a time gap between when the tanker was damaged and when the substitute tanker arrived, this delay is likely to be short-lived and have limited impact on the supply of oil - especially when you consider the potential use of either private or public stockpiles of oil (see Slack in the Global Oil Market).
- Ship owners or captains may be too fearful to send their ships through the Strait for fear of an attack. However, history shows us that this "fear factor" will likely not stop tanker traffic for very long, if at all (see Insurance in Tanker section). It is probable that there will always be ship owners, captains and crews willing to take the risk for the right price.[i]
Increased profits and insurance premiums for those willing to risk attack will certainly push the costs of shipping upward. In addition, a decrease in the number of tankers delivering oil (due to tankers being significantly destroyed) will likely cause more than 90 percent of the tanker fleet to be utilized, also pushing shipping costs up. Note that the price of oil may not necessarily spike because of these increases in transport costs. This is due to the fact that transportation costs make up a very small percentage of the overall price of a barrel of oil.
[i] Interview with individuals from Intertanko, Austin, TX, December 3, 2007.
This page last modified in August 2008