Shipping Lanes, Strategic Passages and Oil Production in the Middle East

Shipping Lanes, Strategic Passages and Oil Production in the Middle East

Concerning energy trades such as petroleum and natural gas, the Middle East is at a crossroads. First, it is an intermediary location as trade routes transit through the strategic passages of the region, particularly Bab el-Mandab and the Suez Canal. Second, it is one of the world’s largest exporter of energy, the majority of which is carried by maritime shipping.

In addition to geopolitics, the geography of the Middle East creates unique challenges for petroleum distribution. The first is the concentration of oil fields around the Persian Gulf (Saudi Arabia, Kuwait, Iraq, Iran, and United Arab Emirates) leaving the Strait Hormuz as one of the only viable outlets to export oil using large oil tankers. The second is the constrained capacity access to the main European markets through the Suez Canal, implying that a fully laden VLCC (Very Large Crude Carrier) cannot transit through the canal and must round Africa.