Team Energy DaisChokepoints are congestive pathways. Oil chokepoints are the strategic locations of trade which have been traversed for the shipment of oil & related products for smooth operation and transit. It helps in regulations, tracking of shipment and delivery of the item. Strait of Hormuz and Malaccan Strait are the world’s most strategic chokepoints (in terms of volume of oil transit).
Chokepoints: Critical for business
Crude Oil and Petroleum is shipped to the corners of the world through chokepoints. The location of these chokepoints helps the communication, reconciliation, and marketing better as these become the focal point for innumerous business deals. Different types of classification systems are used to determine the cost of shipment commensurate with the size of shipment. Average Freight Rate Assessment (AFRA) is the scale which dominates the determination of cost for smaller tankers and AFRA-MAX for the larger ones.
The most popular chokepoints, in terms of business and their strategic locations, are the following: Strait of Hormuz, Strait of Malacca, Cape of Good Hope, Bab el-Mandab, Danish Straits, Suez Canal, Bosporus, and Panama Canal.
Click here to read the story of two Chokepoints: Strait of Malacca and Hormuz
Let us look at the amount of business churned by these individual chokepoints in terms of volume of crude oil and petroleum last year (in million barrels per day):
|
S.No. |
Chokepoint |
Vol. of crude oil and petroleum (mbpd) |
|
1. |
Strait of Hurmoz |
18.5 |
|
2. |
Strait of Malacca |
16.0 |
|
3. |
Cape of Good Hope |
5.8 |
|
4. |
Bab el-Mandab |
4.8 |
|
5. |
Danish Straits |
3.2 |
|
6. |
Suez Canal and SUMED pipeline |
5.5 |
|
7. |
Panama Canal |
0.9 |
|
8. |
Turkish Straits |
2.4 |
Importance of Chokepoints in conducting smooth business
It is significant to have an organized, peaceful, and a reliable transport route when it comes to supplying crude oil and petroleum. A lot of factors influence the popularity and preference of a particular chokepoint for oil movement. A chokepoint where the condition is politically stable is considered to be free from the privacy threats or hijacking. But a few of the strategic locations, for example, Bab el-Mandeb and the Suez Canal face huge issues of operational haphazard and pirating attacks which affect business.
With clarity on the significance of chokepoints, we can acknowledge this fact that even a temporary shutdown or blocking of them can lead to a worldwide crisis:
First and foremost, the shipment won’t progress.
Secondly, it will hamper business between two or more parties.
And lastly, this blockage and improper functioning will lead to an increase in total energy cost and world energy prices.
What if? : Closure of chokepoints and their effects
Closure of any of the chokepoint will invite unpredictable chaos due to the obstruction in the free flow of trade and commerce. Bad el-Mandeb can be taken as an example for understanding how a military, political and humanitarian crisis (Yemen Crisis) can invite trouble to world commerce.
For example, if Bad el-Mandeb is closed, then it would prevent tankers/shipments from the Persian Gulf to reach the Suez Canal. In this situation, the only option left is to take a detour and approach from the southern tip of Africa.
As much as 3.8 m bpd of crude oil and petroleum flowed through its waterways to the United States, European and Asia countries. And these countries are bound to be affected if there is a threat to such an important chokepoint.
Hence, it is evident that the locations which form the framework of a well chalked out and structured business should not become privy of futile international rifts. Such rifts not only strain the relationship but also devoid of a large amount of population much needed energy support.
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