Maths behind Hormuz toll: Is paying Iran for transit cheaper than blockade?
Summary
The Strait of Hormuz has been closed to most ship traffic since the start of the Iran war, causing major disruptions in global oil and gas trade. Iran controls the strait and has begun charging ships a transit fee, which might be cheaper for shipping companies than waiting in blockade conditions.Key Facts
- The Strait of Hormuz links Gulf oil producers to the open ocean and is a key route for about 20 million barrels of oil per day.
- Before the war, 120 to 140 ships crossed the strait daily; now only a few with permission from Iran's Islamic Revolutionary Guard Corps (IRGC) can pass.
- Iran formed the Persian Gulf Strait Authority (PGSA) to manage and update on strait operations.
- Iran has charged ships fees up to $2 million to pass through the strait since the war began.
- The closure has caused losses of about $114.8 billion per day in oil revenues and $7.8 billion per day in liquefied natural gas (LNG) trade.
- Less than 4% of normal traffic currently moves through the strait, excluding illegal “shadow” fleets.
- Economists say paying Iran’s toll could be more cost-effective than remaining blocked, given Iran’s geographic control.
- The blockade has contributed to rising global living costs due to disruptions in oil, gas, and other goods shipments.
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