Israel-Iran Conflict: Mauritius Faces Indirect Oil Shock Threat

The military escalation in the Middle East is disrupting global oil markets. While Mauritius does not directly rely on Iranian crude, tensions in the Strait of Hormuz, a critical route for a significant portion of the world's oil, could lead to rising prices and increased competition for import sources. Despite having strategic reserves, the country remains vulnerable to this conflict.

Since the Israeli offensive against Iran on June 13, global oil markets have reacted nervously. The international benchmark Brent crude saw an immediate increase of 7% on June 13, reaching a temporary rise of 13% the following day. This spike is not necessarily due to an immediate supply disruption but reflects the 'risk premium' that markets apply in response to growing uncertainties.

At the heart of these concerns is the Strait of Hormuz. This narrow maritime passage connects the Persian Gulf to the Arabian Sea and facilitates nearly 20% of the world’s oil production. It plays a central role in global energy trade, being the primary exit point for oil from Saudi Arabia, the UAE, Kuwait, Iraq, and Iran.

Although Mauritius does not directly source from Iran, a potential blockage of this maritime corridor could have indirect effects on the country. Iran's client nations might redirect their demands to other suppliers, including those that supply Mauritius. This redistribution of demand could intensify market pressures and increase competition.

Currently, Mauritius imports its fuel mainly through Sahara Energy, a Dubai-based company, which sources oil primarily from Saudi Arabia. This connection indirectly links the country’s fuel supply to the tensions surrounding the Strait of Hormuz. If the situation persists or worsens, international purchasing costs could rise. Some industry players anticipate a global price increase of around 25%, potentially pushing the price per barrel to about $80.

Despite these challenging circumstances, Mauritius is not entirely defenseless. The country has established a strategic stockpile of 25,000 tons of gasoline and diesel. Furthermore, data from April indicates that annual consumption stands at 220,000 tons for gasoline and 240,000 tons for diesel. These reserves provide a buffer and allow for some maneuverability in the event of temporary disruptions.

At the pump, two factors determine price adjustments: Platts prices and purchase premiums. These are regularly reviewed by the Petroleum Pricing Committee (PPC). So far, the PPC has justified maintaining high prices due to a deficit in the Price Stabilisation Account (PSA). However, the current situation shows a positive PSA for gasoline, amounting to about Rs 300 million. This could absorb a moderate price increase estimated at less than 4%, without an immediate impact on pump prices.

According to sources close to the matter, a mechanism has been put in place to allow Mauritian consumers to benefit from potential decreases in the global market. A new shipment is expected in August, and former suppliers have returned with revised lower pricing proposals. These conditions could lead to a reduction in local fuel prices, but uncertainties surrounding the evolution of the conflict remain crucial.

Commerce Minister Michaël Sik Yuen stated that Mauritius could save approximately Rs 1 billion through adjustments in supply contracts. However, any gains will depend on stability in the region and the evolution of the international market in the coming weeks.