It is being reported in the media today that several big shipping firms have halted all commercial shipments of oil and gas through the Red Sea, a key route for global oil shipments but one that has become increasingly dangerous over recent weeks. Houthis has been staging assaults against Israeli-owned and operated ships in the region as well as any ships heading for Israeli ports since October 7th this year.
Shipping giants such as BP, one of the world’s leading international oil and gas companies operating in more than 80 companies, and Maersk, the second biggest container shipping fleet in the world, have said they will avoid the major Red Sea shipping route due to the attacks in recent days and the highly escalated security situation. BP has said it will keep this precautionary pause under ongoing review.
Analysis by S&P Global market Intelligence found that nearly 15% of the world’s shipping traffic, 21.5% of refined oil and more than 13% of crude oil passes through the route, which is the shortest shipping route between Europe and Asia. The waters between Asia and Africa connect the Indian Ocean to the Mediterranean, with the Suez canal at the tip.
In this blog we’re going to take a look at what’s happening, why it’s happening, and what the effect could be on heating oil prices here in the UK.
Why have shipments been halted?
On Monday this week, the Houthis rebels of Yemen, in the latest in a series of missile and drone strikes on shipping in protest over Israel’s war against Hammas in Gazza, launched a drone attack on two cargo shipping vessels in the southern Red Sea area. The attacks are targeting a route that allows East-West trade to pass through the Red Sea to reach the Suez Canal.
Peter Aylott, Director of Policy at the UK Chamber of Shipping, said the scale and the number of attacks was unprecedented.
In response to the unrest, as reported by the BBC, the UK has joined an international effort led by the United States which announced it was forming a coalition to step up patrols in the area to protect oil and cargo ships passing through the Red Sea. This coalition is supported by other countries such as Canada, France, Bahrain, Norway, and Spain, and has been created as a result of rebel attacks on cargo ships by Houthi militants in Yemen in protest over Israel’s war against Hamas in Gaza.
United States Secretary of Defense, Lloyd Austin, said ‘The recent escalation in reckless Houthi attacks originating from Yemen threatens the free flow of commerce, endangers innocent mariners, and violates international law’.
How might this affect heating oil prices?
With ships being diverted, it adds thousands of miles to their journey, not to mention the extra time it will take, potentially up to two weeks longer, for shipments to arrive at their destination. Ships are being re-routed and will now go the much longer route around the Cape of Good Hope, at the tip of South Africa. The result – an increase of hundreds of thousands of pounds in the cost of transport, some of which could be passed on to us as consumers, potentially having an impact on the prices we pay as well as a delay in goods.
Global events do most certainly have an impact on the price we pay for our heating oil but there are many other factors too such as supply and demand, exchange rates, weather conditions, and refining and distribution costs. Oil prices had been under downward pressure because of higher production, but recent events have triggered fears that oil prices might spike again - so how is this current situation in the Red Sea going to affect the price of heating oil in the UK?
Well, whilst analysts have warned the situation in the Red Sea does risk pushing up the price of oil, the good news is that so far the impact on oil prices has been minimal.
Reuters has reported today that there has been little change in oil prices. In addition, Goldman Sachs analysts have said that the disruption to energy flows in the Red Sea is unlikely to have large effects on crude and natural gas prices as vessels can be redirected, and production should not be directly impacted.
When should I buy my heating oil?
With Christmas just a few days away, many of us will already have ordered our pre-Christmas delivery, but if your heating oil tank isn’t full to the brim, and due to this global unrest which, if it continues could disrupt the flow of oil from major oil-producing countries such as Saudi Arabia and Iraq, you may want to consider ordering a top-up now.
And that’s where we can help!
As your trusted domestic heating oil and LPG supplier with over 90 years of experience in the industry, at Northern Energy we’re independent and family-run, here to provide great value and reliable deliveries, and are first for customer service.
Of course, Christmas is an expensive time, and you may not have budgeted for a top-up of heating oil at this time. We’d advise you to keep an eye on global events in case the situation escalates further as that might impact oil prices, and also plan ahead for prolonged cold spells throughout the winter months, when prices often rise due to increased demand, and lead times can be extended by heating oil suppliers as well.
But if you do want peace of mind and a full tank of heating oil, we can help you budget with our Premium Package*. It’s specially designed to give you real financial benefits as it provides a 2 pence per litre discount on all your heating oil deliveries, premium heating oil for greater fuel economy, and gives added peace of mind with the Emergency Boiler Breakdown which is included too.
And there’s more – with our easy convenient direct debit payments we can help you budget with an option to pay by interest free monthly instalments. To find out more click here, give us a call on 01423 770 666 or email us at helpoil@northernenergy.co.uk.
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And read our full breakdown of whether now is a good time to buy your heating oil for more information, plus it's updated regularly.