Angry motorists were scrambling to buy gasoline. The petrol queues used to go on for miles.
Your licence plate number determined your fuel eligibility. If your licence plate ended with an even number (like 4), you could buy petrol only on an even-numbered day (like Nov 8). If you had to refill your petrol tank on an even day and had an odd number, it was too bad.
We are almost two weeks into President Donald Trump’s war on Iran. There are signs that the Strait of Hormuz could be closed. Petrol may be hard to find on both even and odd days.
The Strait of Hormuz is a narrow waterway separating Iran from Oman. It is about the same length as the distance from Singapore to Batam.
See also: BIS warns of economic danger if Iran conflict proves enduring
Over 20% of the world’s oil flows through the Strait of Hormuz. Every day, 100 tankers carrying crude from Saudi Arabia, Iraq, Kuwait and the United Arab Emirates pass through it. Liquefied natural gas from Qatar uses the same route.
This is the most severe shock to energy markets since 1973. It is cascading through the world economy.
As in 1973, the disruption quickly fed into higher gasoline and diesel prices. There are higher mortgage rates and borrowing costs for the US government.
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Fashions have changed since 1973. Sideburns were popular then, but are rare today. Similarly, global oil dependence is much lower. Oil is a smaller proportion of GDP than it once was. The US has become a top energy exporter because of shale oil.
In 1973, Singapore was a bustling town that had half the GDP per capita of its colonial master. Many people were unaware that Singapore was no longer part of British Malaya. Malaya itself was often confused with the Himalayas.
The 1973 Yom Kippur War was a boon to Singapore’s economy. It cemented the city-state’s role as a neutral and stable hub. While the war caused a massive oil embargo that disrupted the global economy, Singapore emerged as an energy hub.
Singapore had no oil and depended entirely on imports. The oil shock increased energy costs by a factor of 3.
Singapore’s economy depended on shipping through the Strait of Malacca. The disruption to global oil flows led to a collapse of tanker traffic.
Singapore expanded crude storage farms in Jurong and Tuas. It built petroleum terminals and invested in bunkering. Tankers travelling between the Middle East and East Asia were already passing through the Strait of Malacca.
The city simply ensured they had a reason to stop. The port has evolved into the world’s largest bunkering hub. It now supplies fuel to vessels on one of the busiest shipping lanes on earth. Today, the port sells more than 50 million tonnes of marine fuel each year. This is a reminder that geography can be monetised.
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The crisis also changed oil trading. Before the 1970s, the global oil market was run from London and New York. Asia’s demand for refined products was growing faster than the West. The oil shock showed the need for a marketplace closer to the action. Singapore stepped into this role.
Energy majors began relocating their Asian trading desks to Shenton Way. Firms such as BP, Shell, and ExxonMobil were lured to this tropical city. By the 1980s, Singapore had become the principal pricing centre for petroleum products in Asia.
The closure of the Strait of Hormuz may open opportunities for stocks listed on the Singapore Exchange (SGX). There are 39 offshore marine stocks on the market. The stocks have rallied by 10% since the war. They are still at half the EV/Ebitda valuation of the previous oil shock in 2008. In fact, they are 30% below the 2022 Ukraine spike.
Singapore is the world’s largest bunker and jet fuel centre. China Aviation Oil is a vital player, which appears to be trading well below peak valuations. The Gulf crisis could redirect flights to this region.
In 1973, motorists had to queue up for fuel. Today, investors may want to line up for SGX commodity plays.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era
