Announced strategies could offset 70% of Hormuz oil dependency by 2030

Drone strikes on Saudi pipeline expose vulnerability of bypass routes

A McKinsey Global Institute analysis estimates that announced strategies — from expanded oil stockpiles and new bypass pipelines to refinery reconfigurations and clean-energy adoption — could offset roughly 70 percent of the world’s dependency on energy flows through the Strait of Hormuz by 2030. The estimate lands as drone attacks knocked out a Saudi Arabian pipeline that had allowed crude exports to circumvent the strait via the Red Sea, sending oil prices higher.

The findings quantify the scale of supply-chain rewiring under way more than six months into a war that was originally expected to last weeks. On Sept. 1, Treasury Secretary Scott Bessent predicted a swifter outcome, saying, “In two years, the Strait of Hormuz will be a worthless piece of water.” McKinsey Global Institute partner Mekala Krishnan, who led the research, told the Wall Street Journal’s Climate & Energy newsletter that her team’s analysis sees the strait remaining in use as a significant artery, even as it becomes less central.

The Hormuz shock was initially softened by a large release of stockpiled oil, most importantly in the United States and China. McKinsey estimates that hard-hit countries now want to expand their own buffers. The Philippines’s crude inventories could rise from eight days’ supply before the war to ten weeks’ supply, according to the analysis, with Indonesia and South Africa among the others planning to stockpile substantially more.

The worst shortages hit refined products rather than crude, and several governments are pushing to expand those reserves. Australia is planning a 264-million-gallon reserve of diesel and jet fuel. Krishnan’s team noted that the strategy carries costs: refined products can degrade and must be continually replaced. McKinsey estimated that announced plans could expand stockpiles by 7 percent for crude and 4 percent for oil products.

Hoarding only buys time, and it adds upward pressure to prices. That calculus has given pipeline projects new impetus, McKinsey said. They include a new route inside the United Arab Emirates to move oil to ports outside the strait and another that would export Iraqi crude through Syria. Like Saudi Arabia’s East-West pipeline, both could become targets.

In South Korea, where refineries run largely on Middle Eastern crude, some politicians want to reconfigure them to accept more oil from the United States and elsewhere. A plan to incentivize those costly investments has not been finalized, McKinsey said, though the institute identified the combined effect of stockpiling, pipelines and refinery reconfigurations as having the greatest scope to reduce global Hormuz dependency.

Rising oil production elsewhere could further erode reliance on the Persian Gulf. U.S. oil output has risen, and announcements of upstream development have accelerated in Argentina, Venezuela and elsewhere, according to McKinsey. Adding refining capacity looks tougher. President Trump has called for a new refinery, and the Australian government is considering one. Krishnan’s team said the challenge will be convincing investors to finance such projects as oil demand flattens.

Switching to coal reduces dependency on Middle Eastern oil and gas, and so does switching to renewable energy and electrifying energy use with electric vehicles and heat pumps. The biggest surprise for Krishnan, she said, was the lack of consistent evidence that the crisis has boosted the global growth of clean energy and electrification. “It’s not immediately apparent that the answer is going to be lower emissions for the world,” she said.

The numbers sharpen the stakes. Before the war, all these trends were on course to offset up to 7 million barrels of oil a day by 2030, according to Krishnan’s team — equivalent to 35 percent of the oil passing through the strait. That could rise to 15.5 million barrels a day, McKinsey estimates, if governments deliver plans under discussion. The strait would remain in use but with diminished centrality, the analysis concluded.

The supply pressure is visible in U.S. inventories. U.S. crude-oil stocks, including commercial inventories and the Strategic Petroleum Reserve, are at their lowest level since February 1984, at 708.4 million barrels, according to data cited by the Wall Street Journal. The drawdown means “there is no SPR cavalry on the horizon” as Middle East supply disruption picks up again, one analyst told the publication.

The crisis is also reshaping U.S. fuel policy. Senate Majority Leader John Thune said an export ban “honestly makes probably more sense to me,” describing what the Wall Street Journal called an unprecedented move in the diesel market. Interior Secretary Doug Burgum said earlier that the White House opposes such a ban, which some experts said could push prices higher. Brad Delco, chief financial officer of trucking giant J.B. Hunt, said companies have “seen some of the most radical and abnormal swings in fuel prices that we’ve ever seen.”

Outside the fuel market itself, the Trump administration is rolling back power-plant emission rules, described by the Wall Street Journal as one of its most significant efforts to dismantle Biden-era policies designed to curb pollution from coal and new natural-gas power plants. A federal appeals court separately struck down a Trump administration order to keep a Michigan coal plant running. “Ultimately this has the ‘Supreme Court’ written all over it,” a lawyer told the publication, referring to the emissions rollback.

Japan has approved government loans for three natural-gas power plants in Ohio, Texas and Pennsylvania that could meet the average power demand of both New York City and Los Angeles, part of last year’s commitment to invest $550 billion in U.S. infrastructure in exchange for a lower tariff rate. The plants would likely end up powering AI data centers.