Storage tanks in Wink, Texas. Some nations are expanding their strategic petroleum reserves to better shield themselves from energy market shocks. U.S. Treasury Secretary Scott Bessent remarked on September 1st, stating that within two years, the Strait of Hormuz would become strategically insignificant, predicting a shift to new pipelines and diminished Iranian influence.

However, this assessment has quickly proven flawed. Recent drone strikes have severely damaged Saudi Arabia's East-West pipeline, which was designed to bypass the Strait of Hormuz and export crude via the Red Sea, causing oil prices to climb. The conflict, initially expected to last only weeks, has now persisted for over six months. While various measures like promoting electric vehicles and expanding coal use could reduce global dependence on this crucial waterway, each option carries its own trade-offs and introduces new security challenges.

Yet, fresh analysis from the McKinsey Global Institute suggests that by 2030, a series of ongoing strategies could offset up to 70% of the world's energy flow dependence through the Strait of Hormuz. Here’s a breakdown of those strategies:

Expanding Strategic Stockpiles

In response to past supply shocks, the United States and China have previously released large volumes from their strategic reserves. Now, countries most affected by the conflict are looking to bolster their own buffer stocks. McKinsey estimates that the Philippines could increase its crude reserves from just eight days of supply to ten weeks. Similarly, Indonesia, South Africa, and other nations are planning significant reserve expansions.

The most acute shortage isn't crude oil itself, but refined petroleum products. Australia, for instance, is planning to increase its refined product reserves, including the construction of a 264-million-gallon storage facility for diesel and jet fuel. These efforts come at a cost, as refined products degrade and require continuous rotation. While stockpiling provides critical time, it also tends to push up oil prices. According to McKinsey, announced national plans are projected to increase global crude reserves by 7% and refined product reserves by 4%.

Rerouting Transport Lines

The conflict has accelerated several pipeline projects, including a new line in the UAE that would ship oil to ports outside the Strait of Hormuz, and a proposed pipeline to export Iraqi crude through Syria. However, like the Saudi East-West pipeline, these new infrastructures are vulnerable to attacks.

Supply chains are being restructured in other ways as well. South Korean refineries, which depend heavily on Middle Eastern crude, see some lawmakers pushing for facility upgrades to accommodate more oil from the U.S. and other regions. However, incentive policies to subsidize these costly modifications are still pending. McKinsey suggests that, overall, pipeline diversification holds the greatest potential for reducing global reliance on the Strait of Hormuz.

Increasing New Supply

Boosting global oil production could lessen dependence on the Persian Gulf. U.S. crude output is already rising, and countries like Argentina and Venezuela are accelerating the announcement of new upstream projects. Building new refining capacity, however, is proving more complex. While the Trump administration has called for major oil companies to build new refineries and Australia is considering similar projects, securing investment remains a hurdle. With oil demand growth flattening, convincing investors to fund these massive projects is difficult.

Energy Substitution

Switching to coal could reduce reliance on Middle Eastern oil and gas. So too, can electrification through renewables, electric vehicles, and heat pumps replacing traditional boilers. Mekala Krishnan, a partner at the McKinsey Global Institute who led the study, expressed surprise that the crisis has accelerated global clean energy and electrification efforts. "People don't immediately think that the world's solution would be reducing carbon emissions," she said.

What will be the ultimate outcome of all these measures? Krishnan's team calculates that, pre-conflict trends alone were expected to replace up to 7 million barrels of crude per day by 2030, equivalent to 35% of the oil volume transiting the Strait of Hormuz. If all currently discussed plans are implemented, this number could rise to 15.5 million barrels per day. While the Strait of Hormuz may not become worthless, its strategic value is undeniably diminishing.