Over the past days, the airwaves and talking heads have been frightening us with somber predictions of what would happen to the price of oil should current events in Egypt shutter the canal. The oil boys and their allies can barely contain themselves in their appearances of concern and like minded predictions of calamity, such as today's Reuters report quoting Imad al-Atiqi, member of Kuwait's Supreme Petroleum Council "I expect oil to reach $110 during the first half of 2011... A huge amount of oil passes through the Suez Canal..." Thus ever nudging oil prices skyward with Brent Crude already surpassing $100 a barrel. Yet has anyone stopped to determine what the closure of the Suez Canal would actually mean to the oil market in dollars and cents?
In the shipping world the type of vessel that can transit the Suez Canal has its own designation named a "Suezmax" category. The typical deadweight of a Suezmax oil tanker is about 240,000 tonnes.
Now, approximately 7.1 barrels of oil make up one metric tonne. Therefore a 240,000 tonnes deadweight tanker carries some 1.7 million barrels of oil. According to the New York Times, "Taking cargo around Africa would add about 16 days time to delivering oil to world markets."
Calculating a per diem charter rate for a Suezmax tanker at $50,000 per day (and probably less), brings the additional cost of transporting a cargo of oil, lifting 1.7 million barrels around Africa to $800,000 per voyage. More to the point, the additional cost per barrel of oil would be 47 cents per barrel. And these 47 cents would apply only to the some 1.8 million barrels of crude oil that are transported through the canal (an additional 2mm plus barrels can be transported through Egypt overland via the Sumed pipeline).
http://www.huffingtonpost.com/raymond-j-learsy/the-risks-to-the-suez-can_b_819309.html
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