With oil prices ruling high, especially in the Asian markets, in view of the Middle East conflict; the world might see migration of Atlantic basin crude into Asia, according to an economist with Baker Institute, a data-driven think-tank.Addressing a webinar, sponsored by Gulf Times, with Bilateral Chamber, Georgetown University in Qatar, Middle East Council on Global Affairs and Qatar Press Centre as partners, Kenneth B Medlock III, at the Baker Institute and the senior director of the Center for Energy Studies, highlighted the bifurcation between the Asian markets and Atlantic Basin.A lot of the Middle East crude oils that flow out end up being refined in the Asian markets, and those refiners are tuned specifically to utilise those crudes to generate the types of fuels, jet fuels, and distillates but are not available, he said at the webinar, introduced by Gulf Times Editor-in-Chief Faisal Abdulhameed al-Mudahka."Anytime you have a constraint, you'll see price climb. The Pacific Basin in general, so Asian markets are way undersupplied, and those refiners are actually seeing cut runs. In some instances, countries mandating that exports be suspended from their refiners," he said in specific reference to China.In the physical market in Asia, there is a lack of liquidity and has a massively constrained marketplace that is leading to a "disconnect", he said, adding that it is the reason why Asian barrels traded most recently in north of $150 with Kuwaiti blend Saturday trading at $163 in the spot market.However, the Atlantic Basin has a very different picture because the barrels that are in the basin are still finding homes and there is not a lack of liquidity, he said.Terming it as an "incredibly" high price, he said it was because of the lack of substitution capability. There has been dramatic implications for the Asian economies that rely on those crudes, but one would not see the same impact in the Atlantic Basin, so in the US and European markets.Stressing that crude flows will ultimately shift as long as these basis differentials persist; Medlock said "so if the prices in Asia continue to be as escalated as they are, we will begin to see a migration of Atlantic Basin crudes into the region, but there's a logistics problem that has to ultimately be solved to handle that, and it's not clear whether it will be crude or the products themselves, so refined products."He said the effect of these kinds of "extreme" price spikes would weigh on the economies and will have massive implications for industrial activity, for consumer activity, particularly for countries that are importing countries.Jim Krane, co-director of the Middle East Energy Roundtable at Rice University’s Baker Institute for Public Policy, said the Gulf countries need some kind of a formalised agreement with Iran on the Strait of Hormuz."Iran needs a different deterrent to deter strikes on it other than blocking the Strait of Hormuz and damaging the Gulf economies and buildings and safety and security. For the Gulf, Iran needs to have some sort of deterrence and until it can get that in some way, it probably isn't in its interests to agree to a ceasefire," he pointed out.With regard to the Gulf states' leverage, he noted: "The Gulf countries are severely lacking in leverage and that's why this war is playing out on their territories... turns out yet again their leverage is not as strong as they expected and not as strong as some other countries."Rory Miller, Professor of International Politics, Director of the Energy Studies Program and Director of the Small States Research Program at Georgetown University in Qatar, said the impact of the present Middle East imbroglio on domestic consumers in the US and many allies and partners of the US would have its "toll on the foreign policy level".On the humanitarian risk of fertiliser disruption, he pointed out: "Some of the most dependent on fertiliser through the Strait of Hormuz are the most food insecure countries in the world, Sudan, Somalia. So you're going to have potentially cataclysmic and famine like conditions in some parts of the global South."Miller however, wasn't too pleased with the American role in all of this."A leader has to be able to provide security, stability and order for its followers, and the United States has been providing instability, insecurity and disorder for its followers for many a year now," he quipped.Rashid al-Mohannadi, a nonresident fellow at the Middle East Council on Global Affairs, said Turkiye and Pakistan should step into mediation with China's outside support at this stage to de-escalate the Middle East conflict involving Iran and the US/Israel and Qatar is the only country in the region to be transparent on the pecuniary damage to the hydrocarbons sector."Most of the mediation efforts will be left on regional actors like Turkiye and Pakistan at this stage and the Chinese might support them in the background," he pointed out.Expecting the situation to be resolved quicker rather than later; he said what we see is some level of "very cautious optimism" with the current mediation activities, and that the Gulf countries would have to adapt and change in response to how this conflict ends with or without the current dispensation in Iran.He said the Gulf States showed a high level of resilience, but are still in a state of strategic shock since the assumption was that if the US or the Israelis launch a strike, it would be limited towards the US-affiliated bases.Finding structural damages to the (hydrocarbon) facilities in the Gulf, including in Ras Laffan, where he had worked before; al-Mohannadi said "I think Qatar has been very transparent in talking about the damages. It is the only state that actually went out and said this is the reduction in production. These are the units that were attacked and these are the effects."HE the Minister of State for Energy Affairs, the Managing Director and Chief Executive Officer of QatarEnergy, Saad bin Sherida al-Kaabi had revealed that Iranian attacks disrupted 17% of Qatar's liquefied natural gas (LNG) export capacity, causing losses estimated at approximately $20bn in annual revenue and threatening supplies to Europe and Asia."I think post-conflict, many other Gulf States will come out with actual battle damage assessments, and we'll see structural effects on global supply," al-Mohannadi said.He said the damages would have far reaching consequences to the fertiliser market as the exposure of Gulf fertiliser and Gulf feed into fertiliser production has exposure to 1.1-1.7bn people, mostly in Africa or South Asia.Highlighting that Qatar produces between 30% and 40% of global helium, depending on the time of year; he said helium goes into MRI machines, rocketry and semiconductors.People working in the semiconductor industry, and specifically memory chips, are anticipating force majeure to their buyers maybe in a month's time, because they don't have enough helium, according to him.
