Oil price instability spells turbulent future for construction

Political turmoil and recent attacks on tankers in the Middle East have left the world’s oil supply uncertain, an analyst has warned.

Any resulting spike in the price of oil would impact the global construction industry.

Mamdouh Salameh, professor of energy economics at the ESCP Europe Business School in London, has flagged up attacks on oil tankers and rising contention over "choke points" in maritime oil transport routes.

A sudden increase in the price of crude could shift current patterns of supply and demand for the global construction industry.

Impacts would range from a resurgence of spending power in petro-economies such as Russia, Nigeria, Venezuela and the Gulf states.

But they would also lead to a rise in the price of materials such as plastics, and could reduce demand for construction in countries, such as Japan, that have large oil import bills, upsetting clients’ capital investment plans.

"The recent attack on two oil tankers each carrying 1 million barrels of oil in the Strait of Bab al-Mandeb at the southern tip of Yemen, together with Saudi Arabia’s suspension of some oil shipments, have demonstrated just how easy it is to disrupt global oil traffic," Salameh said in a note to media today.

"The four key world chokepoints of oil, including the Strait of Hormuz, Bab al-Mandeb, Malacca and the Suez Canal account for two-thirds of global oil trade traffic, with more than 44 million barrels travelling through them every day.  

"Any hint of a potential outage at these chokepoints can add a few dollars per barrel as a risk premium. This is extremely worrying considering Iran has just threatened to close the Strait of Hormuz as a result of US sanctions. A closure like this could send oil prices far above $150 a barrel."

Image: The Strait of Hormuz (NASA)

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