SUEZ CAN’T SAVE ASIA. THE RED SEA ROUTE IS A TRAP.
The Houthis declared a naval blockade on Saudi Arabia. Two Saudi tankers heading to Asia turned back and headed for the Suez Canal.
But the Suez Canal is not a solution. It is a shortcut that only works for ships heading to Europe or the Americas. Fully loaded tankers are too big for the canal. They have to lighten their load on one side, send oil through Egypt’s SUMED pipeline, and pick it up on the other side. That is not a workaround. That is a bottleneck.
Hormuz is already closed. Four million barrels a day of Saudi oil that used to go to Asia now goes through the Red Sea. If Bab al-Mandab is blocked, those barrels have no way to reach Asia except the long way around Africa. That adds up to four weeks.
Asian refiners are already feeling the pain. Taiwan’s Formosa Petrochemical has secured crude supplies for August but cannot guarantee delivery. China could step in, but its refineries are running at just 58 percent capacity and Beijing has not yet approved export increases.
If both chokepoints close, the world loses 7 to 10 percent of seaborne oil supply. Oil prices could hit $115 to $120 a barrel. A global recession is on the table.
Suez cannot save Asian oil consumers. It just gives them a longer, more expensive route to the same problem.