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Current Affairs

Rise in crude oil prices after Suez canal blockage

Date: 29 March 2021 Tags: Miscellaneous

Issue

As the blockage in Suez canal continues to stop the global trade, the result could have a larger effect on the trade of crude oil.

 

Background

The Suez Canal was blocked by a large container ship known as Ever Given. The ship was pushed off the course by strong winds.

 

Details

  • The resultant impact of canal blockage on crude and tanker rates could effectively show up in the form of higher crude prices. 

  • India is the largest importer of crude oil and similar products via the Suez Canal. These numbers are larger than that of China or South Korea. More than two-thirds of India’s crude oil requirements come from Gulf region.

  • If the blockage is not cleared by spring tide, it will have large implications on the refining operations on a broader scale.

  • The biggest effect on India would be on the import and export of ethane with the US. It would also impact imports of crude from Latin America.

  • India imports about 500,000 barrels of crude products per day via the Suez Canal, followed by China, South Korea and Singapore that import about 400,000 barrels of crude oil.

  • India is sixth in the list of countries that exports crude products via the Suez Canal. Countries such as Russia, Saudi Arabia, Iraq, Libya and Algeria are above India.

  • The biggest effect on oil trade and crude prices will be if the freeing of the container ship ‘Ever Given’ takes weeks which is currently predicted.

 

Suez Canal

  • Suez is an artificially made water way that connects the Red sea and Mediterranean Sea. It basically connects Europe and Asia without having to traverse the Cape of Africa.

  • Suez Canal is not only important for movement of goods but also they control defence and security of the region.