Tension with Iran: West Readies Emergency Oil Supply
As a precaution to Iran's threat to shutdown the Strait of Hormuz, Western powers prepared a contingency plan this week to tap record volume of crude oil stockpiles. Tehran announced Friday its plans to block the world's most important oil shipping lane in an attempt to avert sanctions of its nuclear program.
Senior executives of the International Energy Agency (IEA) emergency plan would release as much as 14 million barrels per day (bpd) of government owned oil stored in the U.S., Europe, Japan and other importers. Similar to the government's response to Iraq's 1990 invasion of Kuwait, action of this scale would be over five times greater, setting a new record as the state's largest release in history.
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Additionally, Saudi Arabia would need to route more crude through the country's East-West pipeline system to reach the port of Yanbu on the Red Sea, freeing an estimated 3 million bpd of export capacity. The United Arab Emirates could also get as much as 1.5 bpd to the Indian Ocean if necessary.
As the IEA continues to keep an eye on the situation, Western governments continue to target Iranian oil supplies and discourage business with Tehran. If the EU releases an embargo on Iran, threatening a ban of 500,000 bpd of the country's crude oil exports, the IEA is less likely to release emergency stocks, industry sources told Reuters.
What's at stake: Strait of Hormuz by the numbers