Attacking Oil Tankers
It’s a rare day when attacks on the flow of oil don’t lead the news. But with so much happening around the world — and in Pennsylvania — in the past couple of days, the story that pirates off the coast of Yemen attacked a 150,000 deadweight ton oil tanker with a rocket got pushed to the back pages (New York Times, AFP, and Wall Street Journal, for example). Each article attributes at least a pip of the recent increase in the price of oil to the attack, even though the attack failed to cause any significant damage.
Perhaps the articles are right: oil traders noticed that attack, and maybe any attack that has anything to do with oil will always phase timid businessmen. But in reality, they should not be so scared.
In my experience, few people in the oil industry are really timid. They do business in all sorts of exciting places around the world. But maybe the financiers who trade oil futures have less fortitude or time for analysis.
The real message of these attacks is that it’s very hard to disrupt the flow of oil in global markets. We don’t have all that much to fear. Oil prices should not be on such a hair-trigger for a panicked surge, and if there’s a “security premium” in the oil price today, we should actually let it deflate — that is, if we were rational about oil pricing, which we may well be in the long run but we are not always in the short-term, even when that “short-term” can last for a pretty extended period.
Pirates are something of a problem for small ships traveling near Somalia and Yemen. They can approach yachts, tugs, and even small cargo ships. Captains and passengers on these types of vessel should take precautions, perhaps stay out of the dangerous waters and certainly stay alert during transits.
But oil tankers are vastly larger ships — in many cases over a thousand feet long. Pirate boats have trouble approaching tankers at all (dealing with the waves that the tanker pushes outward as it plows through the water), let alone pirates’ subsequent struggle to clamber up the side of a tanker while it is underway (necessary to board the ship and capture its crew and cargo). And clambering would really be necessary: the deck of an oil tanker is quite high off the waterline, well above the deck height of pirates’ boats.
The attack on the Japanese tanker this week may represent an escalation in pirate tactics — firing a rocket at the tanker (rather than just threatening ships with small arms fire), presumably in an attempt to force the tanker to stop so that the pirates could board it. But tankers are so big that rocket fire has almost no effect. The pirates pursued the Japanese tanker for hours and were only able to put a small hole in the ship that had no effect on its ability to continue its journey.
In fact, we know a good deal about the resiliency of tankers, even in the face of attacks with much larger weapons. During the Tanker War phase of the Iran-Iraq War in the 1980s, hundreds of tankers were hit with Exocet anti-ship cruise missiles. Relatively few were substantially damaged: most were not even damaged enough to interrupt their transits, and even fewer were damaged to the extent that it was not economical to quickly fix them up and return them to service in the oil trade. If tanker captains take a few precautions — and, like the Japanese captain this week, don’t stop — they have little to fear from pirates or even from larger, military attacks (if any country’s military were crazy enough to start taking shots at oil tankers; anyone listening in Iran, a country that occasionally threatens to do this?).
Tankers’ damage-resistance even extends to modern, more sophisticated weapons that some might think would be more deadly than a 1980s-era Exocet. Sure, the warheads are bigger on some other types of missiles, but they are simply not that big compared to the size of a tanker. And tankers only have a very small number of truly vulnerable areas (e.g., the engine room), so the overwhelming probability is that, if someone shoots at a tanker, even a hit is unlikely to make much difference. The modern military weapons have been optimized for a different sort of target: technological improvements have tried to overcome warships’ active defenses (think of the design effort the Chinese might make to try to overcome American warships’ Aegis defense systems — and how little difference that effort would make in the ability of the missile to hurt a tanker that lacks such active defenses).
If the oil traders took the time to think about the rocket attack this week, they might see it as clear evidence of attackers’ inability to disrupt the oil trade. Shouldn’t a failed attack like this drive the price of oil down, not up? Let’s hope that cooler heads prevail.
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