The Strait of Hormuz is perhaps the most important stretch of water in the world in terms of energy markets. It leads from the Persian Gulf to the Arabian Sea, at its narrowest point is just 21 miles across, and each day about 20% of all the world’s petroleum, and 35% of all petroleum traded by sea, passes through.
Over the past few years, for a variety of reasons, although mainly due in retaliation to Western sanctions, Iran has threatened to block the passage of oil tankers through the strait. A move that would devastate supplies of oil around the world, send prices soaring, and damage economies in the Middle East that rely heavily on petroleum exports and the Strait of Hormuz as a means to deliver the product to customer markets.
OPEC nations in the Persian Gulf, such as Saudi Arabia and the United Arab Emirates, have set up alternative oil export routes, in order to protect themselves from any disruption that Iran might cause at the straits in the future.
Strait of Hormuz. (EmeraldFreight)
Kuwait is much smaller than its OPEC neighbours, and is highly dependent on the revenues it earns from exporting its crude oil products. Every day it sends about two million barrels of oil through the narrow waters between Iran and Oman and any interruption to this could put the country’s economy under pressure.
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Kuwait had intentions to build a pipeline of its own to bypass the Strait of Hormuz, but after considering the project in more detail, have now decided against that plan due to the high associated costs and difficulty of carrying out the project.
The country’s state-owned oil company, Kuwait Petroleum Corporation, studied alternative export options such as pipelines through Saudi Arabia and Iraq. The problem that Kuwait faces compared to some other countries, is that any pipeline for Kuwait must pass through hundreds of miles of an other country’s land.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com