Shut-In Wells and Tanker Traffic: The Real Oil Story Behind the Hormuz Crisis

A petroleum geologist is warning that the ongoing conflict in the Middle East could have far-reaching consequences for global energy production, even if a political agreement is reached to resolve the crisis.

Art Berman, a veteran of four decades in the industry, estimates that 8 million barrels per day (mb/d) of Persian Gulf oil production remains shut-in, with world production down by about 10 mb/d. This could be a 'world-changing event' if not addressed properly, according to Berman.

The issue is not just transporting oil through the Strait of Hormuz, but also restarting wells that have been shut in for months or even years. Restarting a well requires restoring communication between equipment at the surface and reservoirs thousands of feet underground, a process that can take weeks or months and has a high risk of failure.

The International Energy Agency (IEA) confirms Berman's estimate, reporting that Gulf oil production is still 8.3 mb/d below pre-war levels. The US Energy Information Administration (EIA) estimates an average 5.5 million barrels per day (mb/d) of shut-in production in July.