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America’s major oil companies have given a serious warning to the Trump administration regarding the ongoing disruption in the Strait of Hormuz amid the Iran war. According to the report of The Wall Street Journal (WSJ), top industry officials have clearly said that if the obstruction in this important sea route continues, the global fuel crisis may deepen further.
Which factors did the companies express concern about?
In meetings at the White House on Wednesday and in recent conversations with Energy Secretary Chris Wright and Interior Secretary Doug Burgum, the CEOs of Exxon Mobil, Chevron and ConocoPhillips expressed concern over increasing volatility in global energy markets, according to the report. Companies say that the impact of the blockage in the Strait of Hormuz will not be limited only to the supply of crude oil, but the pressure on the availability of refined products may also increase. According to the report, Exxon CEO Darren Woods told officials that if speculators suddenly push prices higher, then oil prices may go beyond the current high level. He also warned that there could be a situation of shortage of refined products in the market. At the same time, Chevron CEO Mike Worth and ConocoPhillips CEO Ryan Lance also expressed concern about the seriousness of the disruption.
Limited scope to increase domestic production in America
Oil industry officials also clarified that the scope for increasing domestic production in the US is limited and it will not be able to compensate for the approximately 9 million to 10 million barrels per day of oil supply stuck behind the Strait of Hormuz. Meanwhile, American oil prices have also increased rapidly. American oil, which was at the level of $ 87 per barrel on Wednesday, increased to $ 99 per barrel by Friday.
Why did Trump ask for help from seven countries?
Earlier, President Donald Trump had said that he has requested about seven countries to help secure the movement of ships in the Strait of Hormuz by deploying warships. Speaking to reporters on Air Force One on Sunday, Trump indicated that he wanted to form an international coalition to provide security to ships passing through this sea route. Trump said that we are talking to countries to monitor the strait, because the same countries are more dependent on the oil of West Asia. We take very little, about one percent oil. For example, China gets about 90 percent of its oil from the Strait of Hormuz. He also said that I am asking these countries to come forward and protect their interests, because it is more important for them. However, till now no country has made a clear commitment to join this mission.
Why is Hormuz so important?
The Strait of Hormuz, an extremely narrow but strategic sea route located between Iran and Oman, is considered the pivot of global energy supplies. More than 20 million barrels of crude oil passes through this route every day. This volume accounts for about one-fifth of the world’s total oil consumption and about a quarter of seaborne oil trade. A large amount of the world’s liquefied natural gas (LNG) is also transported through this route. In such a situation, if there is an interruption in this route even for a short time, its impact is not limited to the oil market only, but is felt in the financial markets, global supply chain and even the household budget of common consumers. This is the reason why the eyes of the whole world are focused on America, Iran and energy markets regarding the current crisis in Hormuz.
