The escalating violence in the Middle East caused a disturbance in the global energy market Monday morning after a major oil company announced it is pausing shipments through a crucial shipping lane.
British Petroleum (BP) said that it is halting oil shipments through the Red Sea because of the uptick in attacks launched by Yemen’s Iran-backed Houthis, a militant Islamist group that the Biden administration removed from the “Foreign Terrorist Organization” list in 2021. BP is the latest major company to pause its operations amid the escalating violence in and around the Red Sea, and the announcement prompted a spike in oil prices worldwide, according to CNN.
“In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” a spokesperson for the company told the Daily Caller News Foundation. “We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region.”
— Micaela Burrow (@micaela_burrow) December 16, 2023
Along with a key Egyptian pipeline, two major straits that bookend the Red Sea handled about 12% of globally traded seaborne oil and 8% of global liquefied natural gas shipments through the first six months of this year, according to The Wall Street Journal.
The news sent oil prices up across the world on Monday, with Brent crude jumping by 2.7% to nearly $79 per barrel and American oil rising by 2.7% up to $73.44 per barrel, according to CNN. In European markets, natural gas contract futures spiked by about 8%.
Before BP decided to halt its Red Sea shipping operations, A.P. Moller-Maersk and Hapag-Lloyd— two major freight shipping firms— announced that they are temporarily preventing their ships from utilizing the southern entrance to the Red Sea, according to the WSJ.
The Houthis have significantly ramped up attacks against commercial interests and U.S. forces in the wake of Hamas’ attack against Israel on Oct. 7. Houthi forces have repeatedly launched missiles and drones at commercial vessels, and the Biden administration has done little in the way of retaliatory or preemptive action against the group.
The Biden administration opted to release 180 million barrels of oil from the Strategic Petroleum Reserve (SPR) ahead of the 2022 midterm elections, when high energy costs were causing political problems for President Joe Biden and fellow Democrats. The vast majority of those releases have not yet been offset, and the SPR, intended to serve as an emergency supply of oil for the U.S. in the event of war or an emergency situation, is at its lowest levels in decades.
Following the outbreak of the Israel-Hamas war, energy experts told the DCNF that the administration’s SPR releases leave the U.S. in a more vulnerable geopolitical and economic position, particularly if the conflict spills over into other parts of the Middle East.
“This is exactly why we have an SPR. But now, we only have half an SPR since Biden sold off half to buy some votes,” Dan Kish, a distinguished senior fellow for the Institute for Energy Research (IER), told the DCNF regarding BP’s announcement.
The White House did not respond immediately to a request for comment.
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