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Chapter 1: What is the main topic discussed in this episode?
The Clare Byrne Show on Newstalk. With Aviva Insurance.
the price of oil has reached its highest level since 2022. This comes after Donald Trump warned that the Iran blockade could last months. So what does it mean for us? And what is the latest from the Strait of Hormuz on which all of these prices are linked and dependent? Here to tell me more on this is Cormac McGarry, Director for Maritime Security Services at Control Risks.
I'll also speak to Danny Hewson, who is Head of Financial Analysis at AJ Bell.
Chapter 2: What recent events have led to the spike in oil prices?
and Hamish de Breton-Gordon, former British Army officer and NATO nuclear defence commander. But Cormac, I'll come to you first on this from a maritime security perspective. What do you see that has changed overnight that has caused this spike in oil prices?
Well, literally nothing has changed overnight. We've got the same picture on the water, specifically in the Strait of Hormuz today, that we have had for the last two weeks and pretty much for the last two months.
Chapter 3: How does the Iran blockade affect global oil supply?
So for the last two weeks, the U.S. has been blockading Iran. And for the last two months, Iran has been pretty much blockading everyone else. Nothing major has changed. What seems to have spurred this oil price spike is a report from Axios saying that U.S. President Trump is going to be briefed today, probably tonight, Irish time, on potentially new military options for the U.S.
Chapter 4: What role does the Strait of Hormuz play in oil transportation?
to take in the Strait of Hormuz region. There's nothing necessarily new there. I would imagine the US president gets briefed on an almost daily basis on military options in the Strait of Hormuz. So some of this could be down to speculative economics. It could be down to actual prices catching up with real supply problems. It's not necessarily down to what's happening militarily on the water.
But these price increases that we're seeing today, this is the Brent price, the Brent crude oil price. So this oil will be due to hit our supply in about a month's time. Is that right? In June?
Roughly speaking, Ireland doesn't completely rely on Middle Eastern oil and gas, but it does rely on the world's supply of oil and gas. So with the Strait of Hormuz effectively cut off, including Iran, that's about 20% of the world's supply. So no matter who we're importing from, that's going to affect the price. And so if you just think about this in terms of mathematics and volume,
Ireland consumes about 150,000 barrels of crude oil a day. That is actually a small amount of what one ship carries. So one ship, one large oil carrier could carry about two weeks of Ireland's crude oil consumption. All it takes is one ship to be stuck and that's two weeks of Ireland's consumption. Now, there should be 135 ships a day getting out of the Strait of Hormuz.
Currently, there's almost zero. So, in short, yes, it already is affecting Ireland, obviously. What we're probably seeing with this price spike today, one explanation is that this is the market actually setting a more of a longer-term price on these supply constrictions.
OK, Cormac, I'll let you go. Thank you very much for being with us.
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Chapter 5: What changes have occurred in maritime security recently?
And I'll move to Danny Hewson now at AJ Bell, who's been watching the markets on this. So we are told, as Cormac explained to us, Danny, that this spike overnight was due to that Axios report around Donald Trump being told about additional or military options that he had ahead of him, which seems to suggest that this will head into the longer term. Is that what you attribute the rise to, too?
Yeah, absolutely. It does seem that people have woken up this morning and read that report and considered what that could potentially mean to supply going forward. That said, we saw a spike this morning when the price of a barrel of Brent crude hit 11%. 126.41. It has come down to almost $121 a barrel.
So, I think traders are sort of taking a bit of a breath and trying to work out what's really going in. But it's been a really difficult week for oil markets. We, of course, heard that the United Arab Emirates is leaving OPEC.
That's expected to have very limited near-term impact on the price of oil, but going forward, that could be significant and does raise questions about the future of OPEC in general. It has said it is going to raise output slightly, but... Yeah, I mean, investors are just wondering whether or not the taco trade, Trump always chickens out, can still be applied.
And that is now factoring into the price of oil.
But Danny, what we've heard is that even if things were to snap back to normal in the morning, there will be a very long tail on the disruption to the markets and to the world economy. Is that your view?
Yes, we're already seeing the impact of higher oil prices. And even if it were to snap back, you're not going to see prices go back to where they were in December or even where they were at the start of the war at just over $70 a barrel. We have seen people now buying oil at this price, which is now being paid for at the pump.
It's being paid for by farmers who are needing to put fertilizer on their field. It's being involved in creating energy and in creating all the goods that we eat on our shelves. And this is now impacting inflation. We're expecting figures today from the Eurozone showing it nearing 3%.
And this, of course, is going to have an effect on the European Central Bank and its ability to cut interest rates. We're now expecting today to have a hold from the Central Bank But we are expecting them to say, look, as soon as June, it is likely that we will have to put interest rates up. And that, of course, does then have a knock on to growth.
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Chapter 6: How are speculative economics influencing oil prices?
the Iranian regime have the Straits of Hormuz. And without a resolution to that, I don't think we're going to get a resolution to anything. And, you know, the nuclear thing, to me, is a sideline. Obviously, he's got that completely focused in his mind and seems unable to look away from it. But...
I and others don't think that there's any way that they can produce a nuclear weapon, certainly in the next few years.
We're in this place this morning where Axios, as you say, is presenting him with these, or Axios is reporting that he's being presented with these options, which include a wave of aerial strikes and infrastructure targets. And the reason for doing that would be to force Iran back to the negotiating table. So essentially, you would take us back
to where we were before that fragile truce or ceasefire was agreed.
Yeah, I mean, that seems to be the case. But again, it is only going to harm the Iranian people. And actually, earlier on this week, I was with the Kurdish foreign minister, who have a large border with Iran, and of course, the Iranian Kurds as well. And, you know, they look through a slightly different optic. They are a sort of area of stability.
And discussing with them and others, it's very difficult to know what could be struck that would bring the regime or what's left of the regime back to the negotiation table. Because in the end, he's talking about taking out their power supply and everything else. Whoever is still running the place, no doubt will not, his lights won't go out. So it's... I think it is frustrating.
Maybe this is more sort of dancing around that Trump's doing, you know, hoping in the fact that they will see some sort of reason in Tehran or wherever they are.
But it just, you know, the offer from Iran, I understand, as you've said, is let's sort out the Straits of Hormuz and then go on to something else, which, you know, for everybody except perhaps Trump, that does seem to be a sensible approach.
I'm sure you've seen these reports as well. The Wall Street Journal is saying that the United States is pushing for this maritime freedom construct, which would be an international coalition aimed at restarting commercial shipping in the Strait.
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