Hormuz Pipeline Dreams: Reality Check for Oil Prices

U.S. Treasury Secretary Scott Bessent recently stated that new economic sanctions would make the Strait of Hormuz 'irrelevant' to oil shipping, predicting that 50% to 70% of energy products normally shipped through the strait will be transported by underground pipelines instead.

However, energy experts disagree with this assessment. The International Energy Agency (IEA), whose members include major oil-producing countries like Saudi Arabia and the United States, warns that the Strait of Hormuz will continue to be essential for shipping in the near future.

The IEA notes that even when new pipeline projects are completed, they will only amount to about 10-12 million barrels per day, which is still short of the 20 million barrels per day that passed through the strait before the Iran war began in late February.

Analysts warn that continued vulnerability of shipping routes, including Bab el-Mandeb, means regional agreements are vital. Talks between the U.S. and Iran aimed at forging an agreement have broken down, leaving consumers to bear the cost of shipping problems.

The supply disruption has pushed global oil prices to over $100 a barrel, leading to higher gas prices for consumers. Analysts predict that price volatility will continue, with David Goldwyn stating 'I think that we're looking at elevated oil, natural gas, and food prices probably for at least the next year.'