Blocking Strait of Hormuz would affect gas prices immediately
Prices at the pump here in the U.S. would be impacted almost immediately if Iran chooses to block the Strait of Hormuz.
Chiotakis: Just a couple of hours ago, there was another threat from Iran, saying if it had to, it could block the flow of oil through the Strait of Hormuz -- a waterway that borders that country and connects to the Persian Gulf and channels almost 20 percent of the world's oil. Iran has threatened to send military ships to block the strait if President Obama signs a bill to impose sanctions to keep Iran from making nuclear weapons.
And now the U.S. Fifth Fleet -- which protects the area for American interests -- said no, that's not gonna happen.
Kent Moors is a professor at Duquesne University, and he's an expert on oil policy and particularly oil as it pertains to Iran. Professor, thanks for being with us this morning.
Kent Moors: Thank you.
Chiotakis: What would an action like shutting down the Strait of Hormuz, how would that trickle down to the gas pump here in the United States?
Moors: Well it would trickle down very quickly. On average, 18 percent of all the crude oil transported in the world on a daily basis goes through the Strait of Hormuz, so if you close the straits, in a matter of about, oh, 30 minutes to an hour, you're going to raise the crude oil price $10 to $15 a barrel worldwide. And you'd see about 30 cents to 40 cents on the gallon almost immediately.
Chiotakis: How likely do you think it is that Iran would actually take that action?
Moors: I think it's extremely unlikely. And most of the world is discounting the reality. The Iranians, of course, are trying to show the rest of the world that if the new round of heavier sanctions are introduced, making it more difficult for them to have access to the financial side the international crude oil market, there are consequences to the worldwide oil flow that's not particularly desirable. So this is political posturing, but it's political posturing that's got a rather heavy point to it.
Chiotakis: I'm curious, Professor, what does it say to you about our energy security in this country? Or even for that matter, around the world? That shutting down the Strait of Hormuz would knock off 20 percent of the world's oil supply?
Moors: Volatility is the single biggest problem in the oil market. We've always been in a situation where supply has been particularly tight. The amount of supply we have in the world is sufficient, but what we need to do to maintain meeting the increasing demand, we need to bring on line oil that's more expensive to produce, to process and to distribute. If you eliminate from that market 18 to 20 percent of that oil we've expected, then you've simply precipitated the problem.
Chiotakis: Professor Kent Moors from Duquesne University. Professor, thanks.
Moors: Thank you.