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UK-US Airstrikes: 9 Million Barrels of Oil in Jeopardy

The international crude oil market is currently facing a severe transportation crisis.

The United Kingdom and the United States launched air strikes against the Houthi militants in Yemen, who immediately retaliated, causing a significant impact on shipping in the southern part of the Red Sea.

According to Bloomberg's ship tracking data, this month's vessels transporting crude oil and refined products from Saudi Arabia and Iraq have changed their routes, steering clear of the Bab-el-Mandeb Strait at the southern entrance of the Red Sea and rerouting to Africa. Middle Eastern cargo bound for Europe will be delayed by more than two weeks compared to usual.

Several airline executives have issued warnings that even with the United States safeguarding navigational safety in the Red Sea, this threat will continue for months. The global shipping giant Maersk also warned that due to the increased danger in the Red Sea, the global shipping network might collapse.

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At present, the transportation of nearly 9 million barrels of oil from Saudi Arabia and Iraq is expected to be delayed.

This will have a significant impact on the global oil market, especially for Europe, which has cut off Russian oil imports and relies entirely on Middle Eastern crude oil, this is undoubtedly a "bad news":

According to CCTV Financial News, in December 2023, Middle Eastern crude oil shipped to Europe was 570,000 barrels per day, almost half of the 1.07 million barrels per day in October.

As geopolitical conflicts intensify and 9 million barrels of oil are in urgent need, will Europe once again face an "energy crisis"?

European Energy Crisis

In fact, if we look back to the past, even if the Middle East was in turmoil and oil transportation was delayed for a long time, it wouldn't be a big problem for Europe, because Europe's energy imports mainly relied on Russia before.According to BP Energy's 2020 statistical data, Europe's proven fossil energy reserves are at 1% for oil and 2% for natural gas, the lowest globally. In contrast, Russia is not only the world's richest country in natural gas resources but also the third-largest oil producer globally, truly oil-rich and gas-abundant.

Furthermore, Russia's natural geographical advantages allow it to transport natural gas to Europe through a single pipeline. Therefore, from economic and geopolitical considerations, Europe has been importing a large amount of energy from Russia.

So, how dependent is Europe on Russian energy?

Data shows that Europe's imported crude oil accounts for 48% of Russia's crude oil exports, with countries including Estonia and Poland importing more than 75% of their oil from Russia.

Looking at natural gas, almost half of Europe's imported natural gas comes from Russia, and the natural gas sold to Europe accounts for one-third of Russia's exports. Every winter, Europe relies on Russian natural gas supplies for heating.

It can be said that natural gas from Russia determines whether Europeans can have a good winter.

So now everyone should understand why Europe experienced the "coldest winter" after the outbreak of the Russia-Ukraine conflict in 2022. It was precisely because of Europe's high dependence on Russian energy that the conflict led to a chain reaction after Europe cut off Russia's energy supplies.

The loss of Russian energy in Europe

In fact, the problems caused by energy shortages are far more than just heating; the economy is affected more severely.Henry Kissinger once said:

"Whoever controls the oil, controls the world."

Now, with the diversification of energy sources, although oil is no longer unique, this statement remains theoretically correct. The impact of energy shortages on the European economy is enormous.

Take Germany, the "engine" of the European economy, as an example. In July last year, Germany's PMI index recorded 38.8%, hitting a new low in over three years.

What does this mean?

A PMI less than 50% means that the manufacturing industry is generally in a state of contraction. A PMI less than 40% can almost certainly be considered as the manufacturing industry being in a severe recession.

In just three years, Germany has experienced two severe recessions in its manufacturing industry. The first was the pandemic in 2020, and the second was the energy crisis caused by the outbreak of the Russia-Ukraine conflict.

Due to Germany's determination to decouple from Russian energy, it has directly led to high domestic energy prices, a sharp increase in manufacturing costs, and a severe impact on delivery times and product quality.

Data shows that after the Russia-Ukraine war, the average ex-factory price of German industrial products soared by 25%, significantly losing competitiveness.

Moreover, this is not the end of the story. Due to high energy prices, a large number of German industrial enterprises have chosen to "move," directly relocating factories to places like China and the United States, leading to the risk of "deindustrialization" in Germany.So after losing Russian energy, the entire Europe faces an energy crisis, and the impact is enormous, especially for manufacturing countries like Germany, it is no less than a "life and death disaster".

Suffering from the "energy crisis" again?

Many people here may wonder, since Europe is so dependent on Russian energy, why did it cut off Russian energy supply at the beginning? Isn't this killing the enemy at the cost of 800 and losing 1,000?

Europe made such a decision, of course, for a reason. On the one hand, it is due to political factors, with the United States giving orders; on the other hand, it is also out of consideration for its own interests.

In fact, due to the high dependence on Russian energy, with the energy lifeline being held by Russia, Europe has been making efforts towards energy diversification.

But unfortunately, compared with Russian energy, importing energy from the United States and the Middle East is too far away and too expensive.

It was not until the outbreak of the Russo-Ukrainian conflict that Europe finally made up its mind to completely get rid of its dependence on Russian energy from two aspects:

According to the "European Joint Action for Affordable, Secure, and Sustainable Energy" published by the European Union, the first is to diversify the sources of imported natural gas, and the second is to accelerate energy transformation and reduce dependence on fossil fuels.

So now we can see that Europe has increased the import volume of liquefied natural gas from the United States and crude oil from the Middle East, all in an effort to achieve diversified energy imports.

In 2022, Bloomberg reported that in the six months since January, the European Union's imports of oil from the Middle East soared by 90%, with a large amount of oil being transported from the Middle East to Europe.However, it seems that Europe probably never anticipated that after making a tough decision to stop using Russian oil and gas and switch to purchasing oil from the Middle East, another issue would arise. The outbreak of the Israeli-Palestinian conflict has plunged the Middle East into chaos.

Now, no one can predict whether the delay in the transportation of 9 million barrels of crude oil will be just the beginning. If, in the future, crude oil shipments from the Middle East to Europe are forced to take a detour around Africa, then Europeans may have to worry about an energy crisis again.

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