Amid the U.S.-Israel conflict with Iran, the closure of the Strait of Hormuz highlighted the vulnerability of a key global oil supply route. This event has prompted discussions on the need for diversified oil export options. Experts suggest that the recent oil price surge following the strait’s closure has underscored the imperative for alternative solutions to prevent similar disruptions in the future.
Jim Krane, co-director of the Middle East Energy Roundtable at Rice University’s Baker Institute for Public Policy, emphasized the need for proactive measures to mitigate such risks. With Iran’s control over the strategic waterway connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, approximately 20% of the world’s oil shipments pass through this narrow passage, affecting major oil-exporting countries in the region.
Although the reopening of the strait led to a temporary drop in oil prices, the lingering uncertainty has spurred discussions on diversifying export routes. Currently, the primary alternatives to the Strait of Hormuz are the pipelines operated by Saudi Arabia and the U.A.E., such as the Abqaiq-Yanbu pipeline system and the Abu Dhabi Crude Oil Pipeline.
However, experts like Kenneth Medlock from Rice University caution that the existing alternative routes have limited capacity, indicating the need for further infrastructure development to ensure a reliable bypass of the strait. As countries explore new options, including pipeline expansions and potential long-abandoned routes, the timeline for implementing these solutions varies from two to seven years, contingent on various factors like topography and logistics.
While the urgency to find alternative routes has escalated following recent events, the feasibility and security of these options remain crucial considerations. Naji Abi-Aad, COO of Petroleb, emphasized the historical vulnerabilities of alternative export pipelines in the Gulf region, citing previous disruptions due to political conflicts. As discussions on diversification continue, stakeholders are exploring a range of strategies to safeguard global oil supply chains from potential disruptions in the future.