Ill considered Iran War continues to reveal how vulnerable global economies are in their dependence on fossil fuels.
A generation of business and political leaders are internalizing this message, and making plans accordingly.
Crude oil prices jumped Monday after Saudi Arabia closed its critical pipeline that bypasses the Strait of Hormuz, a disruption that will constrain global supplies at a time when the market is already tight.
Drones launched from Iraq damaged the East-West pipeline on Thursday, forcing the Saudi government to close the key crude oil artery. Riyadh has not disclosed how badly the pipeline is damaged or how long it will remain shut.
“The relatively contained price reaction suggests the market still expects Saudi inventories to cushion exports in the near term, but if the disruption extends beyond the five-to-seven-day inventory cushion, that could change quickly,” said Janiv Shah, an oil market analyst at Rystad Energy, in a Monday note.
A pump station appears to have taken serious damage, said Andy Lipow, president of Lipow Oil Associates. Riyadh may be able to bypass the pump and restart the pipeline with lower output, Lipow said. This is why prices have not surged even higher, he said.
“The longer the shutdown, the higher the price. Judging from the on-line pictures, it will take months to repair,” Lipow said in a note Monday.
In other news:
Reuters:
Exxon Mobil brought its 264,000-barrel-per-day (bpd) refinery in Joliet, Illinois, offline after a power outage occurred on Sunday, the company said on Monday.
The outage occurred at about 3:30 p.m. CT on Sunday and power was restored at around 7:00 p.m., according to a company statement.
The outage triggered the refinery’s safety flare and resulted in a shutdown.
The company said it is assessing the refinery’s status, and the cause of the incident remains under investigation.
The Joliet refinery supplies key fuels to consumers in the U.S. Midwest. It can produce about 11 million gallons a day of gasoline and diesel fuel, according to the company website.
The disruption comes amid a tight global fuel market. The Iran war and Ukrainian attacks on Russian refineries have strained fuel supplies, while strong exports have further tightened domestic inventories.
The U.S. national average price of diesel last week surpassed $6 a gallon for the first time ever. Any prolonged operational disruptions could exacerbate an already tight fuel market, sending prices even higher.