It’s all too easy to forget how tight oil supplies can get.
That might be because we’re used to hearing empty threats — like when Chavez warned the world he would form a brand-new superpower oil cartel.
Not that we’ve ever put much stock in his rants, mostly because he needs us more than we need him; our refineries along the Gulf Coast were built to process the heavy oil Venezuela produces.
The latest round of sanctions imposed on Iran, however, gives us pause…
The tension further intensified on Wednesday when Britain ordered Iran to close its embassy in London.
And with this situation, things could get ugly — and fast.
The biggest concern isn’t over disrupting Iran’s oil production.
The country only pumped about 3.6 million barrels per day last month. Replacing that supply would make an already tight market tighter, but it could be done.
No, we’re more worried about a tiny waterway roughly 34 miles wide…
Flowing between Iran and Oman is the Strait of Hormuz, which connects the Persian Gulf with the rest of the world:
It’s the most critical choke point in the world, through which travel nearly 16 million barrels of oil on a daily basis — or roughly 17% of the world’s oil supply (not to mention all the liquefied natural gas exports from Qatar).
Whether or not the threat of military action taking place is justified, it’s enough for certain OPEC countries to look for alternate shipping routes.
The precautions taken by the United Arab Emirates are a perfect example.
The UAE built a 480-kilometer pipeline to transport up to 2.5 million barrels per day of its crude exports to the Fujairah terminal on the Gulf of Oman.
And OPEC members aren’t the only ones with cause for concern.
About 75% of crude exports shipped through the Strait of Hormuz have one destination in mind: Asian markets — including Japan, India, and China.
Right now, China has about 50 million vehicles on the road…
That number is projected to triple by 2020.
It’s no wonder China is pumping billions of dollars into less risky oil-producing regions, especially considering China’s oil demand is growing at a feverish pace.
You can find the week’s top stories in the energy markets and more, below.
Until next time,
Editor, Energy and Capital
Rare Earth Profits Surge: Nobody Saw This Technology Coming
While everyone else is distracted by the 170 billion barrels of oil beneath Alberta’s soil, a small mining company is busy developing a “super-mine” that will lead to billions of dollars in profits in rare earth minerals. The best part: This tiny miner’s fortune is paying off big for early investors.
3 Bakken Stocks Under $10: How to Own Your Piece of the Bakken Oil Wealth
The secret behind North Dakota’s oil boom is out, and a herd of investors is finally catching on to what we’ve known for years.
Bill Gross is Wrong: You CAN Earn More than 5% Per Year
The best strategy to win big safely in this volatile investment climate.
Ron Paul’s Free Market Solutions: Trade Is More Profitable Than War
Editor Jeff Siegel discusses Ron Paul’s take on international diplomacy.
Facebook IPO: How to Trade Facebook Today
Analyst Ian Cooper explores the reasons to ignore a Facebook IPO, and offers two alternative “backdoor” trades.
Fed Declares War on Dollar: A Matter of Days Before the Banking Crisis Gets Hot!
What happens to U.S. stocks — and gold — when Europe catches fire?
Wanted: Vanadium Supply: The Next Rare Earth Scenario
Vanadium has all that rare earth-type opportunity, yet it has a very stable base on the steel-strengthening side… And it’s about to take off in the next year or two.
2012 Stock Market Forecast: 8 Reasons to Be Bullish Next Year
Editor Steve Christ takes a look into his crystal ball and makes his 2012 stock market forecast.
My 5 Rules for Successful Investing: The Greatest Investment Lesson I’ve Ever Learned
When I look back now, I realize I was just lazy. I didn’t want to deal with the day-to-day requirements of constantly monitoring my investments. So I decided to let somebody else, “the expert,” deal with the headaches. I couldn’t have been more wrong. Here’s what I learned…
Energy: Security Vs. Independence
Editor Keith Kohl explains the difference between energy security and independence — and why investors should never mistake the two.
Why Should I Invest: What’s It All For?
From homeownership and a four-year college education to a nine-to-five job and an individual retirement account, in many cases what they were “supposed” to do turned out to be the wrong thing to do.
Alternative Energy Warnings: Delusions – The Secret to Lost Opportunities
Editor Jeff Siegel provides a rational look at our energy future.