Pinch points and oil pirates

The new issue of New Scientist magazine has some fairly horrifying scenarios looking at ways we could experience a sudden global oil shortage. Since world output is just keeping pace with demand, any drop in production will mean immediate effects:

In the days when oil producers had more leeway, they could make up for a disruption somewhere in the system by quickly raising production by around 3 million barrels a day… That crucial reserve capacity has now fallen below the daily output of some producers - meaning that if the taps were turned off in any one of a number of unstable oil-supplying nations, such as Nigeria, Iraq, Iran or Angola, the impact would be felt almost immediately.

Focusing on “pinch points” (see this cool interactive map) in the transport of oil by sea, New Scientist suggests a single act of sabotage in one of these places could send the world economy reeling. In 2003, the ship Dewi Madrim was boarded by pirates in the Strait of Malacca, an especially narrow pinch point. They took over the bridge, steered for a bit, then zipped off in their speedboat as suddenly as they’d appeared. It’s widely seen as a practice run for a future attack, which today would be enough to send oil prices intergalactic given the precarious condition of the current market. According to Time magazine:

…the strait is traversed each year by some 50,000 ships carrying one-third of the world’s trade and half its crude oil, including 90% of Japan’s oil needs. Its narrowest point, near Singapore, is barely 2 km across, making passing ships easy targets.

Aside from the obvious crackdown on anti-Western groups all over the planet that would instantly ensue should such an attack occur, consider the ripple effects of fuel shortages, and how our attempts to take decisive action and finally “solve the problem” could make things even worse. How would the international markets respond to rationing, for instance? Would there be massive public investment in biofuels at further detriment to the hungry stomachs of the world’s poor, causing more food riots? And what would massive, emergency, deficit spending do to the value of the dollar, and inflation, etc.?

Filed under Law, Oil |