How much oil goes through the Strait of Hormuz?
The headline number: about one barrel in five. Roughly 20 million barrels of crude oil and refined products move through the Strait of Hormuz on a normal day, out of world consumption of around 100 million. If you like your statistics in kitchen terms: for every five tanks of gas pumped on Earth, one of them — give or take — spent part of its former life as crude on a tanker squeezing past Iran.
And it’s not just oil
Hormuz also carries about a fifth of the world’s liquefied natural gas, nearly all of it from Qatar, which has no other way out. So the same strip of water is simultaneously the world’s most important oil chokepoint and its most important LNG chokepoint. This is a remarkable act of geographic concentration, the supply-chain equivalent of keeping all your passwords on one sticky note.
Who’s actually on the hook
Here’s the part American readers usually get backwards: most Hormuz oil goes to Asia — China, India, Japan, South Korea. The U.S. imports relatively little of it directly. So why would an American care? Because oil is priced on a world market. There is one global pool of barrels and one (okay, roughly two — Brent and WTI) global price. If a fifth of supply is threatened, the price of every barrel moves, including the ones pumped in Texas that never see a tanker. You cannot regionalize your way out of a global price. Ask Europe, circa 2022, about natural gas.
Why markets sometimes shrug at a scary number
Given all that, you might expect any Hormuz disruption to instantly triple oil prices, and yet — check the dashboard — reality is frequently less dramatic. Three boring reasons:
1) Spare capacity. Saudi Arabia and friends usually keep some pumping capacity idle, some of which can reach the sea without Hormuz (that Red Sea pipeline again). 2) Strategic reserves. Governments hold emergency crude — the U.S. version is the Strategic Petroleum Reserve, which in the current crisis has been releasing on the order of eight million barrels a week to cushion the market (you can watch its level fall on the dashboard, which is either reassuring or alarming depending on your temperament). 3) Expectations. Prices embed the market’s guess about duration. A disruption the market believes will resolve in weeks gets priced very differently from one it believes is permanent — even if the satellite pictures look identical.
Whether the shrug is wisdom or complacency is, of course, the question. Landfall’s whole design is to put the physical reality and the market’s reaction side by side — the divergence — and let you watch the gap, rather than telling you which side is right.
Keep reading
What happens if the strait actually closes · How it reaches your wallet · The glossary. Numbers here are round on purpose — the strait’s flow moves week to week — and nothing on this page is financial advice.