Why is the State less exposed to kerosene trapped in the Strait of Hormuz?

MadridSince the airport association ACI Europe issued an alert about a fuel shortage if the blockade of the Strait of Hormuz is prolonged —it has been practically closed since the United States and Israel attacked Iran—, all eyes have been on the supply of kerosene, the fuel used by aviation. While Europe's exposure to oil and gas from the Persian Gulf is lower compared to other countries, particularly Asian ones, kerosene from this region, which passes through the Strait of Hormuz, accounts for 45% of the total consumed on the Old Continent.

infrastructure not exempt from controversy for its contribution to industrial pollutioninfrastructure not exempt from controversy for its contribution to industrial pollution— and, therefore, it is not imported, explain from the Association of the Fuel Industry in Spain. The same applies to diesel: 76% is produced in the State. "At the moment, Spanish refineries are maximizing their production of both products to supply the market," explain from this sector lobby.

Who has precisely clung to this "advantage" of the State regarding kerosene production and, therefore, to less external dependence has been the first vice-president and Minister of Economy, Carlos Cuerpo: "We import much less kerosene, among other things, due to infrastructure [...] and this protects us much more than other countries", Cuerpo indicated in an interview on Onda Cero this Monday morning. In the same way as the Repsol executive, the head of the Economy acknowledged that if the war in the Middle East and the consequent closure of the Strait of Hormuz do not stop, "new concerns indeed begin to emerge, such as the availability of kerosene or aviation fuels."

From the sector, they explain that there are two keys that help understand why Spanish refineries can play this role. On the one hand, flexibility. Spanish refineries can receive and process different types of crude oil —the CEO of Repsol has estimated at 60 the different types of petroleum that can be processed in the State—. This allows buying petroleum from different origins, and therefore not depending on specific markets and different qualities. Furthermore, different derivatives can be obtained from it.

The other element highlighted by Imaz is "conversion capacity". The sector emphasizes that "strong" investments by oil companies in the past have allowed for a "complex" industry that allows "squeezing" the barrel of oil. This means that more derivative content can be obtained from a barrel. Also, that the degree of added value (profit margin) for each barrel purchased and subsequently processed is higher. In fact, for this reason, Spain can export petroleum derivatives, and it does so to countries like Portugal, Morocco, and France.

"The [state's] situation is privileged," summarized Maarten Wetselaar, president of Moeve (formerly Cepsa), during his speech at the Wake Up Spain! conference organized by El Español and in which Imaz also participated. Wetselaar reiterated this after acknowledging that the current scenario is "worrying" regarding the "physical availability" of oil and gas in Europe. "I don't know if we are aware that the situation is very complicated," also insisted the president of Naturgy, Francisco Reynés, at the same event. "Out of 130 ships per day [that transited the Strait of Hormuz] in the last four weeks, it has dropped to an average of five," recalled Reynés. For the executive, however, the turning point could come in the coming weeks, if the problem is not resolved and countries have to resort to reserves or even more polluting alternatives.

Price problem

But beyond availability, the other major headache for Europe, and Spain, is the price of these raw materials and their derivatives in a global market. In the case of oil, the CEO of Repsol has warned that reaching 150 dollars a barrel for Brent "is not a hypothesis." "We are already practically in this scenario," said Imaz. The sector also believes that even if the conflict stabilizes and, therefore, the Strait of Hormuz is unblocked soon, "it will take weeks" for the energy market to normalize.