The Suez Factor: oil price drops; the rate of fall slows down

 

Suez Canal Blockage

As the news spread about the partial success of refloating the megaship, Ever Given, the oil price went down in the early hours of Monday; the rate of drop, however, has slowed down in proportion to the angle of rotation of the vessel as if there was a mathematical correlation between the two.

On Sunday, the hope of success just vanished into the thin air, as the Japanese firm, which owned the ship, made a doomed a prediction on Friday that the waterway would be cleared for navigation by late Saturday, but to no avail.

At present, the ship has been refloated 80% with the rest of the mission being the more difficult phase, according to the Dutch company that is involved in the salvage operations: he implied that the rest of the operation, more or less, is at the mercy of nature; despite the use of state-of-the art machinery, the operators still have to wait for the tide to complement its ‘job’; in fact, a spring high tide on Sunday night immensely helped the operation to get to this point.

With the partial success of the mission, global markets breathed a sigh of relief: there are over 400 container ships stranded at both ends of the Suez Canal to resume their respective journeys; about 11 ships carry livestock; some of them carry oil and petroleum products; a few shipping companies, having been tired of waiting, took the costly and time consuming route around the Cape of Good Hope of Africa – adding about 12 days of additional sailing.

The blockage that the ship owners blamed on the gusts of winds, coupled with sandstorms, has resulted in immense financial loss to many parties: Egypt is losing about $14 million a day; global traders, who couldn’t transport good between Asia and Europe, lose millions of dollars every passing day too; some countries have been forced to ration fuel as they could not get the supply to their shores in time.

In this context, who really bears the responsibility for the blockage, inevitably, arises and legal experts think it is not clear-cut; it means, the legal wrangling over the liability will continue for months, if not years, to come unless a compromise is made by the parties involved.

The head of the SCA, Suez Canal Authority, of Egypt, meanwhile, added yet another dimension to the legal saga. He said although there were sandstorms at the time of mishap involving the Ever Given, he could not rule out human or technical errors.

 

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