Israel-Palestine war: OPEC, Iran and the politics over crude oil
Majority of Israel's imports are light crude oil. Its main sources include CPC Blend crude from Kazakhstan and Azeri Light from the Caspian Sea. Girish Linganna explores the challenges, diversification efforts, and potential impacts of an oil embargo on Israel's crude oil supply.
Amid the ongoing Israel-Hamas war, the Organization of the Petroleum Exporting Countries (OPEC) has, for now, side-stepped calls by Iran for an oil embargo against Israel. The reason for Iran's persistence on the subject is that Israel, lacking domestic crude oil production, has imported about 300,000 barrels per day (b/d) of crude oil this year for processing in its refineries. The majority of these imports are light crude oil, known for its ease of flow and cost-effectiveness.
Israel has been importing crude oil or processing it at its two refineries in Haifa and Ashdod. Light crude oil is a type of crude oil that has a relatively low density and flows easily. It is often considered more valuable in the oil industry due to its lower processing costs and higher yields of valuable refined products like gasoline and diesel.
One barrel of crude oil is approximately equal to 158.9873 litres. This is the standard measurement for a barrel of oil. Israel primarily relies on two main sources for its oil supply: the CPC Blend crude, originating from Kazakhstan and exported via Russia's Black Sea port of Novorossiisk, and Azeri Light, which is transported from Turkey's Mediterranean port of Ceyhan.
The term "CPC Blend crude" refers to a type of crude oil known as the Caspian Pipeline Consortium (CPC) Blend. This oil is sourced from the Caspian Sea region, particularly Kazakhstan, and is transported through the Caspian Pipeline Consortium's pipeline system for export.
Azeri Light refers to a specific grade of crude oil produced in the Azeri-Chirag-Guneshli (ACG) oil field in the Caspian Sea, which is located offshore of Azerbaijan. It is known for its relatively high quality and is an important export commodity for Azerbaijan. Azeri Light crude oil is typically transported via pipelines and shipped from the Mediterranean port of Ceyhan in Turkey to various international markets.
According to data from S&P Global Commodities at Sea, combined, they made up more than 50 per cent of Israel's crude oil imports this year.
Despite being predominantly secular, Kazakhstan and Azerbaijan are both part of the OIC (Organization of Islamic Cooperation), an organization that identifies as the "collective voice of the Muslim world" and aims to "safeguard and uphold the interests of the Muslim world."
Iraq's Kurdish crude oil exports from Ceyhan used to be a significant source for Israel until March. However, due to a legal dispute that interrupted the flow of Iraqi oil from Ceyhan, Israel has diversified its sources of crude oil. Israel has since increased its crude imports from Gabon and Nigeria, and it has sought assistance from Brazil and Egypt to make up for the shortfall.
Additionally, Israel's fuel imports this year have averaged around 50,000 barrels per day, primarily coming from India and the United States.
According to Jim Burkhard, the Vice President and Head of Research for Oil Markets, Energy, and Mobility at S&P Global Commodity Insights, imposing an oil embargo on Israel would carry more symbolic weight than causing significant damage. He noted that the United States alone exports 3 million to 4 million barrels per day of crude oil, which means the US could, at the very least, substitute any lost oil supply. However, he did acknowledge that there might be concerns related to the quality of the replacement crude.