Suez Canal officials claim that low visibility caused by a sandstorm and 40 knot wind are to blame for a massive container ship running aground and blocking traffic in the East-West trade route. MV Ever Given remains grounded as eight Egyptian tug boats continue the effort to dislodge her and unblock that section of the Suez Canal. Meanwhile, merchant vessels and oil tankers are gathering at either end of the canal, waiting patiently for traffic to be permitted through. The incident in the canal has directly affected oil prices, causing 6% rise. Also, this situation will potentially affect oil markets through the coming weeks. In fact, there are growing concerns it will indirectly lead to an average price of $4.00 per gallon of gas in the United States.
Even more significant, the world is seeing first-hand just how vulnerable maritime chokepoints like the Suez are to disruption, whether accidental or otherwise. A significant amount of the world’s commerce passes through the Suez each year. It did not take very long for a disruption in the Suez to cause a chain reaction and ripple effect through world markets. Global supply chains remain susceptible to external events, especially in this later stage of the COVID-19 pandemic. From the Suez Canal to Malacca Strait, the world’s trade routes are dependent on the safe and expeditious transiting of chokepoints and canals. As the past 24 hours have shown, it takes little to render a chokepoint or canal inoperative.
Today has been another travel day for the most part, so I will probably provide more thoughts on this topic tomorrow, as well as an update on the situation in the canal.