Red Sea shipping attacks have impacts in Pacific
Jan. 12—Ongoing attacks on merchant ships in the Red Sea by Houthi militants from Yemen are causing ripples here in the Pacific.
The violence has prompted most major shipping companies to divert vessels from traveling through the Suez Canal, forcing them to take much longer routes around the South African Cape of Good Hope. It's causing massive delays and rising costs, and analysts warn that if the shipping disruption continues long term, it could contribute to severe global inflation.
Akhil Ramesh, a senior researcher at the Honolulu-based Pacific Forum, which studies the intersection of economic, trade and national security policy in the Indo-Pacific, said that "the issue in the Red Sea affects countries that have any economic interests around the globe — so it affects all nations in the world."
Iranian-backed Houthi militants had been periodically attacking merchant vessels passing through the Red Sea through much of 2023, but upped the ante Nov. 19 when a group of fighters flew and landed a helicopter on the Galaxy Leader, a Japanese-operated cargo ship with links to an Israeli company, and seized it.
The group said the hijacking was to show solidarity with Palestinians as Israel continues to wage a bloody offensive in Gaza that has leveled entire neighborhoods in retaliation for the Oct. 7 massacres in Israel by the militant group Hamas. The Houthis pledged to attack any ship they believe is traveling to or from Israel.
But since then the group has attacked ships that don't have clear ties to Israel. Since seizing the Galaxy Leader, Houthi militants have attacked commercial ships at least 23 times — including strikes by drones and ballistic missiles.
On Wednesday the United Nations Security Council passed a resolution calling for an immediate end to the attacks. On Thursday the U.S. and British militaries launched strikes on several Houthi-controlled sites in Yemen as tensions continued to escalate.
Before the recent crisis about 30% of global container traffic and more than 1 million barrels of crude oil made their way through the Suez Canal per day, according to data from the global freight booking platform Freightos Group. Maritime consultancy company Drewry's World Container Index showed global shipping rates jumping 61% over the first week of 2024, and attributed the spike to the Red Sea attacks.
"Anywhere in the world, if there's a disruption in the shipping lanes, it will affect the prices of your everyday goods — especially if it affects the price of crude," said Ramesh. "If the overall larger market is affected, at the end of the day, your products on the shelf are affected."
Countries across the Pacific have been showing increasing concern as merchant ships and workers from the region find themselves in the cross-fire. Last week Japan, South Korea, Singapore, Australia and New Zealand were among the Pacific countries that joined the United States in making a joint statement calling for an end to the attacks, charging that the Houthis are "jeopardizing the movement of critical food, fuel, and humanitarian assistance throughout the world."
While the violence in the Red Sea is causing economic anxiety across the globe, some maritime industry companies in the Pacific potentially stand to benefit.
In an article published Saturday in the shipping trade publication Freight Waves, industry analyst Zach Strickland wrote that "disproportionate shipping rate increases resulting from the Red Sea attacks further incentivize shippers to bring freight into the U.S. West Coast from Asia, as a pandemic-era pattern of shipping to Eastern ports continues to unwind."
But that doesn't necessarily mean any relief for Hawaii consumers buying goods coming into Hawaii's ports.
Ramesh explained that "you will still be affected because price of crude oils will be up in the market, which will shoot up the price of commodities that Hawaii imports ... because whoever is shipping it in, whether it's coming from California or Washington state, (prices are) still going to be up."
Armed conflicts around the globe have in recent years made supply chains prone to disruption — and Hawaii has frequently had to adapt to those disruptions.
In 2019 the majority of imported crude oil to Hawaii came from Libya (57%), followed by Russia (34%). The Libyan oil made its way to Hawaii in tankers traveling though the Suez Canal, into the Red Sea, across the Indian Ocean and through the South China Sea before finally docking in Hawaii. But in 2020, Libyan warlord Khalifa Haftar seized oil fields in the country with the help of Russian Wagner Group mercenaries, disrupting global markets.
That year Libya provided only 16% of Hawaii's oil, while Russia remained at 34%, becoming Hawaii's top overall source for 2020. The disruption forced Par Pacific — which owns Hawaii's only oil refinery — to turn to other sources, including the war-torn Republic of Congo and others, to make up the difference for Hawaii's needs.
In March 2022 Par Pacific announced it would stop importing Russian oil after the Kremlin launched its invasion of western Ukraine. In the days after, President Joe Biden signed an executive order banning Russian energy imports, and Hawaiian Electric — which relies largely on petroleum-powered generators — announced that due to rising oil prices and Russia sanctions, residential customers would see price hikes.
But Par Pacific says it doesn't anticipate that the current crisis will affect its ability to get oil.
"We do not anticipate this will have any impact on our crude supply for Hawaii; however, we are continuing to closely monitor the situation," said Par Pacific spokesman Marc Inouye. "It's important to note we receive our crude oil from a number of geographical locations throughout the globe, and this diversity helps to support energy assurance for our islands."
Nevertheless, the price of oil is going up worldwide amid the attacks. Rakesh said that in particular when it comes to oil imports, the Red Sea crisis could add fuel to the ongoing debate over how to make Hawaii more self-sufficient. Hawaii has been one of the country's most petroleum-dependent states and is trying to diversify its power grid.
Hawaii is also more dependent on foreign oil sources than other states, as few U.S.-flagged oil tankers service routes that transport American oil to Hawaii and other Pacific island territories. And under the federal Jones Act, foreign-flagged ships cannot participate in interstate trade between American ports, meaning they cannot legally pick up oil from the mainland and deliver it to Hawaii.
In 2014 a state task force predicted that "if access to foreign sources of petroleum products is reduced (e.g., due to Chinese growth, Korean peninsula instability, Asian natural disasters impacting supply sources), Hawaii may need to rely on a significant amount of domestic supply and be exposed to higher freight costs. These costs will directly impact consumers."
In 2015 Hawaii became the first state to pledge to work toward powering the state with 100% renewable energy by 2045 both to fight climate change and make the islands more self- sufficient. But that has come with challenges of its own.
Planned solar farm and battery storage projects have faced delays or cancellation, and some officials have warned about possible electricity shortages occurring in the wake of decommissioning a large coal-fired power plant with those projects still not complete.
Rolling blackouts that affected thousands of households across Oahu on Monday have been blamed in part on stormy weather reducing the amount of solar energy being generated and stored in battery systems for release during the peak evening use period, as well as slowed wind power generation during Monday evening and some reduced generation by the city's HPOWER garbage-to-energy plant, according to Hawaiian Electric.
------
Star-Advertiser staff writer Andrew Gomes contributed to this report.
