Shipping CEO: "Oil to $440"

The war games have officially begun...

In the midst of global trade strife, Iran is threatening to close-off the Strait of Hormuz. This is a huge concern for the United States and the impact it would have on our unstable economy.

Currently, approximately 40 percent of all American crude imports pass through the Strait of Hormuz before landing on U.S. soil.

Therefore, Bob Bandos – CEO of GAC North America, a marine logistics and service company stationed in Dubai – has sent an alarming message to American consumers...

If Iran does, in fact, cut off supply from the strait we could face oil costs rising to $440 per barrel.

Bandos told Pierre Bertrand of International Business Times:

[T]ankers can haul 1.8 million barrels of oil a day through the strait. If that supply is choked off, the effect would be similar to the fuel shortages of the 1970s - but more extreme, Bandos said.

"That would be nothing compared to this," Bandos said, who added the shortage would be global.

If the 1973 embargo experience repeats itself, the price of a barrel of oil could soar to $440 a barrel.

 

Recently, other analysts have reported on the issue, siting that oil could rise to at least $200 if the Hormuz Strait is closed. Societe Generale reported on the worst case scenario of Iran taking retaliatory measures against oil sanctions. According to SocGen, this is the biggest economic risk facing the globe right now.

 

Although experts aren't convinced the straight would remain closed for an extended period of time, a choked-off supply could result in debilitating oil (fuel) shortages mirroring those of the 1970s...only this time, it would be far more “extreme”, according to Tehran Times.

 

As fears of war have emerged, Iran now has quite a bit of leverage as it has sent crude oil prices surpassing $112 a barrel.

 

If matters worsen and the strait is closed, stock market volatility would only be the beginning....

 

Shippers would halt activity with the added strain coming from such an extreme oil-price spike. Bandos said that companies “usually spend anywhere between $30,000 and $120,000 a day to charter a tanker ship, and that does not include bunkering and fuel costs.”

 

If the strait does close, Bandos has no doubts that oil prices will reach record heights in a situation similar to the 1973 embargo dilemmas pushing oil costs up to $440 for just one barrel.