Here’s another post following up on the earlier one about free passage through the Strait of Hormuz, the pinched off little turn in the Persian Gulf where the waterway is at its narrowest. On Bluesky, in response to my earlier post, one user pointed me to this video, a daily ~30 minute update on a Youtube channel called What’s Going on With Shipping.
I want to start by stating clearly the basis upon which I’m sharing this video. I’d never heard of the channel before a couple hours ago. It’s run by a guy named Sal Mercogliano who says he’s a former merchant mariner and historian who teaches maritime history and also consults on the topic. In other words, he appears to be a merchant shipping and tanker professional/nerd. And he runs this shipping news channel. I can’t independently vouch for his credibility. However I watched today’s episode and a number of factors – subscriber count, reliance on credentialed news articles and industry data sources, tone, meticulousness and more – make me think that it’s at least legit enough to get a beginning overview of the situation in the Gulf. I found it fascinating. It reminds me – sadly – of reporting on the supply chain breakdowns at the beginning of the COVID pandemic. You suddenly had to come up to speed on the complex but to most of us little understood world of global supply chains, the underbelly and machinery of how the modern interconnected world actually runs.
There’s no one big revelation in this episode. It’s more the granular detail, all the moving parts that can’t possibly fit into mainstream news accounts. Two of the most interesting takeaways for me were these: First, the immediate reason few if any ships are going through the Strait isn’t simply the danger. The world of maritime insurance and reinsurance is very complex. And one of the international financial regimes that govern it mandates certain capital requirements insurers have. The outbreak of this war immediately changed the risk models which automatically dramatically raised those capital requirements. The insurers don’t have that much money on hand. So they were all basically left with little choice but to cancel their contracts, raise rates, collect those rates and thus increase capital on hand. Once that’s done at least the capital requirement issue will be solved. Second, President Trump says that in addition to underwriting maritime insurance in the Gulf the US will escort tankers through the Strait if necessary. What Mercogliano says is that the US Navy doesn’t currently have remotely enough ships in the Gulf to do that. That’s important. There are a lot of other details that are not surprising but still fascinating to learn more details about. The whole energy extraction system relies on a steady number of tankers coming to part to pick up the oil or gas or LNG or whatever. If there are no ships there isn’t like an off switch to stop the stuff coming to port to be shipped off. And there isn’t enough storage to bank the stuff for more than a very short period of time.
Mercogliano doesn’t say so directly. But you get the distinct sense listening to this stuff that very little thinking has gone into how to manage the impact of very predictable actions on Iran’s part. In any case, I recommend watching at least some of the video. It’s fascinating stuff.
