Panama CityPanama Canal set an all-time oil-transit high.
Traffic rose 74% to 1.77 million barrels daily in April as Iran’s Hormuz blockade cut Gulf crude routes to Asia.
Priority slots now auction for up to $1 million; supertankers reroute around Africa’s Cape of Good Hope.
Sources: TASS
THE CHOKEPOINT MAP
Roughly a third of the world's seaborne oil moves through just four narrow passages: Hormuz, Malacca, Suez, and the Bab el-Mandeb. The Panama Canal is the fifth — smaller in oil volume but irreplaceable for Atlantic-to-Pacific flows. When one chokepoint closes, the others absorb the shock at premium rates.
THE LOCK CONSTRAINT
Unlike Suez, which is a sea-level cut, Panama is a stepped waterway — ships are lifted 26 meters into Gatún Lake by freshwater locks, then lowered on the other side. Every transit consumes roughly 200 million liters of fresh water that flushes out to sea. Drought directly limits how many ships can pass.
THE AUCTION SYSTEM
Panama runs the only major chokepoint that prices itself dynamically. Regular slots are booked months ahead; anyone arriving without a reservation joins a queue or bids in auction for an unused slot. During the 2023-24 drought the top auction price hit $4 million for a single transit — more than the cargo's freight margin.
THE CAPE ALTERNATIVE
Before Suez opened in 1869, every cargo between Europe and Asia rounded the Cape of Good Hope. The route still exists — it adds roughly 10-14 days and 3,500 nautical miles versus Suez, but no tolls and no chokepoint risk. Every time a chokepoint tightens, supertanker charter rates spike and the Cape suddenly pencils out again.
WHY ASIA REROUTES WEST
Persian Gulf crude normally flows east — China, India, Japan, South Korea take roughly 80% of Hormuz exports. With Hormuz blocked, Asian refiners turn to Atlantic basin barrels: West African, Brazilian, US shale. Those barrels reach Asia via Panama or the Cape, which is why a Hormuz incident shows up as a Panama transit spike thousands of miles away.
THE 1977 HANDOVER
The canal was built by the United States (1904-1914) and run as US sovereign territory until the Torrijos-Carter treaties of 1977 transferred control to Panama by 1999. The Panama Canal Authority is now a Panamanian state entity — the auction revenue funds roughly 6% of Panama's GDP.