This Might Hurt a Bit

The problem with gasoline, like any restricted commodity, is that it has an extremely reactive pricing market.  Very often if you’re paying attention to news involving the oil world you’ll notice a pattern: gas prices spike and dip well before the supply-chain could possibly have been affected.

When you’re talking about source-to-market supply chains as large that of gasoline events in one section of the chain naturally take time to propagate throughout the entire line.

Prices however, they don’t need to wait.  Commodities speculators can take bad news and run with it, spiking the price of everything from crayons to the gas you put in your tank.  Well, this definitely counts as bad news and don’t be surprised if you see gas prices climb a bit as a result.

Somali pirates hijacked a supertanker hundreds of miles off the Horn of Africa, seizing the Saudi-owned ship loaded with crude and its 25-member crew, the U.S. Navy said Monday.

It was the largest ship pirates have seized, and the farthest out to sea they have successfully struck.

The hijacking highlighted the vulnerability of even very large ships and pointed to widening ambitions and capabilities among ransom-hungry pirates who have carried out a surge of attacks this year off Somalia.

Saturday’s hijacking of the MV Sirius Star tanker occurred in the Indian Ocean far south of the zone patrolled by international warships in the busy Gulf of Aden shipping channel, which leads to and from the Suez Canal. A U.S. Navy spokesman said the bandits were taking it to a Somali port that has become a haven for seized ships and bandits trying to force ransoms for them.

Given that incidents of piracy in this region have spiked 75% in the past year alone something is going to need to be done by the international community.  The idea that pirates can literally steal any ship on the sea and get away with it with impunity has the potential to drive regional merchant ship traffic to a standstill.  And we’re talking Suez Canal merchant traffic, of which there’s one major component: oil.

The Somali government has admitted there’s little they can do to change the situation.  These pirates are too well-funded and too well-defended.  Their home port of Eyl may be so well defended that the French military refuses to approach the area but if this behavior continues, or even escalates, military action in the form of a direct strike or a blockade will be required.  Modern civilization simply can’t function when it’s fuel-line is in jeopardy.

By seizing oil tankers Somali pirates have gone from petty ransom seizures to something much larger.  They are, in effect, trying to put a knife to the globe’s jugular.  This is a hotspot in the making and it’s only going to get worse.  Don’t be surprised if we hear Fox News screaming about how the Obama Administration is “wagging the dog” while playing stock-footage from Blackhawk Down in the near future.

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