Analysts are concerned that the current conflict across the Red Sea could lead to a jump in oil prices. This is threatening to cast a long shadow on the world's energy markets. Recent Houthi attacks on commercial ships passing through the Red Sea have raised the specter of oil price hikes and potential disruptions across the wider energy landscape.
The Red Sea, a vital artery for global trade, carries roughly 10% of the world's seaborne oil. With Houthi drones and missiles targeting vessels traversing the waterway, major shipping companies like Maersk have rerouted their tankers, adding precious miles and days to delivery schedules. This disruption comes at a precarious time, when the delicate balance between oil supply and demand is already straining under geopolitical tensions and lingering pandemic anxieties.
The immediate concern is the potential impact on oil prices. However, the Houthi conflict isn't limited to oil. The Red Sea is also a crucial conduit for other energy sources, including liquefied natural gas (LNG). While LNG tankers haven't been directly targeted yet, the heightened security risk could deter shippers and buyers, potentially impacting energy supplies in regions heavily reliant on imported LNG. This could lead to price increases and energy shortages, particularly in emerging economies that depend on natural gas for power generation.
This leaves the energy market in turmoil. The trajectory of the Houthi conflict remains unpredictable, and any escalation could have a significant impact on global energy markets. Additionally, the international community's response, including the recent deployment of a multinational naval force, will play a crucial role in determining the extent of the disruption.
What does this mean for energy in the UK?
Due to the lack of energy security in the UK we are still very dependent on the wider energy market. This means that if energy prices start to rise globally, they most likely will in the UK too.
As prices are still volatile in the UK this will put a lot of pressure on energy suppliers and subsequently, businesses and households.
What could this mean for your business?
Your business should ensure that they are prepared for energy prices to go up in the new year. The best way to proof your business against this hike is to sign your contract before prices rise. Get in touch here with one of our energy consultants to find out more.
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