$200 a barrel oil?

Even if the Middle East crisis were to miraculously go away tomorrow, scores of ordinary people are hopelessly resigned to their fear that high fuel prices are here to stay and will stay up for a very long time.

But even if such fears are misplaced if the government radically intervenes, such pedestrian fears in a sense are correct insofar as Iran continues blockading the Strait of Hormuz through which a fifth of the world’s oil passes

So even if the Persian Gulf fighting stopped today, it would take four to six weeks to restore oil production, four to eight weeks to settle the oil markets and two months to normalize shipping.

Prices, in short, can stay up for months.

That is a dreadful prospect that practically begs the question: Could oil hit a devastating $200 a barrel?

Analysts and energy officials no longer think the question is far-fetched. Oil prices are likely to soar substantially if the crucial Strait, which since February allowed only a trickle of oil the world desperately needs to transit, stays closed for two or more weeks.

As this is happening, the cost of Brent crude — considered the global oil benchmark — soared more than 60 percent since the war started, with prices briefly peaking at $119 per barrel last week.

Brent crude isn’t the whole story, however, even it would be the basis should the Marcos administration decide to suspend the oil excise tax.

To understand this, economic historian Adam Tooze, in a recent Substack newsletter, pointed out that there are four other crucial benchmarks: the WTI, Murban, Oman and Dubai benchmarks.

Brent is the world’s “default” oil price since most global trade is priced off this. WTI is the US benchmark of American-produced oil and usually posts the lowest prices.

For us and Asia, however, far crucial are the Murban, Oman and Dubai benchmarks, all of which are used for pricing Middle East oil.

The Murban benchmark is crude from Abu Dhabi, delivered at Fujairah port, just outside the Strait of Hormuz. Recent drone strikes have hit Fujairah.

Note here that though the UAE sends its oil to the Fujairah port and Saudi Arabia now is frantically rerouting its oil to its Red Sea port at Yanbu, combined pipeline capacities of these two alternate routes are only 3.5 to 5.5-million barrels per day as against the 20-million barrels per day that normally flows through the strangled Strait.

The Oman benchmark, meanwhile, is the key benchmark for Gulf crude transiting via Hormuz that’s sold to Asia.

(Many refineries in China, Japan and South Korea are built specially to process Gulf-grade oil. Japan’s refiners get 95 percent of their crude from the Gulf, while China receives 45 percent of its oil via Hormuz. Several Asian countries also heavily import Gulf oil. For our part, Petron probably uses the Oman benchmark since its oil imports for the country’s 180,000 barrel-per-day sole refinery in Bataan also come from the Gulf.)

Lastly, the Dubai benchmark is used to price most long-term Gulf oil to Asian export contracts. It tracks alongside Oman as a measure of how hard Asian markets are squeezed.

As of last week, Middle East oil was the most expensive in the world.

Reuters reports that Dubai prices were assessed at a record $157.66 per barrel for May loadings, surpassing Brent futures’ all-time high of $147.50 in 2008. Oman crude futures, meanwhile, hit a record high of $152.58 per barrel.

With those surging prices, tighten your seatbelts now rather than later.