U.S. says pipelines will make Strait of Hormuz be irrelevant. Energy experts disagree

AMMAN, Jordan — The U.S. has announced new economic sanctions aimed at loosening Iran’s hold on the Strait of Hormuz while counting on Middle East oil producers to quickly build new pipelines bypassing the key shipping route. But energy analysts say replacing shipping capacity through new infrastructure anytime soon is unlikely. The result is expected to be continued higher prices for consumers.

“What we are going to see over the next two years — the strait is going to become irrelevant,” Treasury Secretary Scott Bessent told an NBC affiliate earlier this month, adding that 50% to 70% of energy products normally shipped through the Strait of Hormuz would be transported through underground pipelines. “It is going to become just another body of water.”

Energy analysts and the international organization representing some of the biggest oil producing countries warn that the strait will continue to be essential for shipping into the near future.

The United Arab Emirates says it expects a $3 billion pipeline expansion to its port of Fujairah to come on line next year. But other major projects, including a larger Saudi pipeline expansion, are likely to take several more years, according to the International Energy Agency, whose members are oil producing countries including the United States.

“And even when these big projects finish, the amount of oil that will still need to pass through the Strait for total Gulf exports to return to pre-war levels could exceed 10 million barrels per day — around half of prewar levels,” the IEA’s senior oil market analyst, Rebecca Schulz, tells NPR.

The IAE says the sharp drop in shipping since the U.S. and Israel attacked Iran in February has been the biggest energy supply disruption on record.

“I think that we have to accept that this crisis in the Strait of Hormuz, the constraints on exports are going to be a somewhat permanent feature for the next few years,” said David Goldwyn, a former U.S. State Department special envoy. “The dynamics of the conflict, which are that Iran wants to get paid for exports, is not going to change. The U.S. inability to achieve a military outcome that would force freedom of navigation in the strait also seems very unlikely.”

“Irrelevant is way too strong and overstated,” says analyst Robert McNally, referring to Bessent’s prediction on the Strait of Hormuz.

“When we talk about energy flows, the Strait of Hormuz is the most relevant chokepoint on the planet. Even if regional producers are able to build pipelines and options to direct flows around Hormuz, the benefit, and there will be a benefit to that, will not make Hormuz irrelevant,” says McNally, who served as senior director for international energy on then-President George W. Bush’s National Security Council.

McNally noted that Iran has repeatedly demonstrated that it is able to attack redirected routes and locations of expanded terminals. Most oil and liquefied natural gas (LNG) infrastructure in and around the Gulf was designed to use the Strait of Hormuz for export.

The IEA says that continued vulnerability of shipping routes, including Bab el-Mandeb, where Yemen’s Iran-allied Houthi rebels have launched attacks, mean that regional agreements are vital. Talks between the U.S. and Iran aimed at forging an agreement have broken down.

“In essence, while bypass routes for oil are helpful for ensuring supply through periods of instability, they cannot substitute for the need for a durable long-term regional settlement to the conflict. All the more so as the bypass routes remain vulnerable to attack as we’ve seen with recent Red Sea troubles,” says Schulz.

Goldwyn, president of Goldwyn Global Strategies, says the new pipelines expected to become operational over the coming years are expected to amount to only about 10 million or 12 million barrels a day — significantly below the 20 million barrels per day that passed through the strait before the Iran war began in late February.

“So it’s a partial solution,” he says.

Limited alternatives to pipelines

The Bab el-Mandeb, a narrow waterway between the Arabian Peninsula and the Horn of Africa, which is the southern entrance to the Red Sea, is one of the few remaining alternate routes for Gulf exports, particularly Saudi oil. It has traditionally accounted for about 5% of global energy exports.

But Saudi Arabia has backed Yemen’s government against the Iran-backed Houthi rebels. After a Saudi attack on a Houthi-controlled runway at the Yemeni capital’s international airport, the Houthis responded by attacking Saudi-linked ships.

“It’s a chokepoint, it’s a painful one, but it’s one we’ve been dealing with for the last few years,” says McNally, president of Rapidan Energy Group, referring to Bab el-Mandeb. “It comes and goes but it doesn’t trap supply. Whereas Hormuz traps supply as you see from shutdowns of field production and refinery outages in the region.”

Most oil and liquefied natural gas infrastructure was designed to use the Strait of Hormuz as the export route.

Iraq is negotiating with Turkey over a 600-mile-long pipeline running from its northern oil fields to the Turkish port of Ceyhan on the Mediterranean. But the project has been mired in disputes between the two countries and internal conflict between the central government in Iraq and the semi-autonomous Iraqi Kurdistan region.

The Iraqi government also says it is planning to revive a defunct pipeline to Syria and is discussing with Jordan a pipeline from Iraq’s southern port of Basra to Aqaba, on Jordan’s Red Sea coast.

Unlike oil, liquefied natural gas — widely used to heat homes — can’t be transported through pipelines. Qatar, one of the world’s biggest LNG producers, on Tuesday criticized the U.S. sanctions against Iran, saying they were unilateral. Qatar shares drilling rights on the offshore South Pars field with Iran. Other Gulf producers have indicated they would comply with the sanctions.

“There is no bypass pipeline for LNG. So you’re talking about Qatar, the world’s second-largest exporter of LNG being beholden to Iran,” says Goldwyn. So they’re either going to have to pay the Iranians a price for getting their exports out or they’re going to suffer economically. And that has consequences for natural gas prices for the rest of the world.”

Consumers bearing cost of shipping problems

The supply disruption has pushed global oil prices at times to over $100 a barrel, leading to higher prices at the gas pumps. Analysts say that price volatility is not expected to end anytime soon.

“I think that we’re looking at elevated oil, natural gas, and food prices probably for at least the next year,” says Goldwyn. “For consumers, we’re looking at high prices for travel, particularly jet fuel, we’re looking at higher prices for food because fertilizer isn’t coming from the Gulf.”

The IEA notes the Hormuz crisis has highlighted the Gulf’s crucial role in supply chains other than energy, including global fertilizer and aluminum markets and exports of commodities crucial to healthcare and microprocessor manufacturing.

“The pipeline projects won’t be finished in time to help consumers if Hormuz doesn’t open, period,” says McNally. “And even if all of them were built in time, which is impossible, but even if they were, they could still be hit by Iran. So they don’t confer total invulnerability. … Don’t want to downplay it, it’s good to have diversity, it’s good to have options, but it will not insulate consumers even if it happened on time which it can’t.”

A boost for renewable energy alternatives

While the supply disruptions have increased interest among many countries in renewable energy such as solar energy and wind power to limit dependence on oil and gas imports, those alternatives are expected to have a limited impact. Shortages and higher prices are already leading some countries to turn back from oil to coal and explore nuclear electricity generation.

“I think you are seeing a significant push for renewables for energy security reasons but it will not relieve any of those countries of the medium risk of fossil fuel prices, petroleum product prices because they’re not easily substitutable in the next five, maybe to eight years if that,” says Goldwyn.

He says while solar and wind power can provide significant amounts of electricity, “transportation is harder because there isn’t a great substitute for gas and diesel particularly for heavy equipment vehicles and the like.”

Accurate shipping data difficult to gather

While President Trump says the U.S. now has “total control” over the Strait of Hormuz due to a U.S. naval blockade, it has been difficult to verify the numbers of vessels transiting the waterway.

That is both because some vessels, fearing attack, turn off their automatic identification systems transponders — or AIS — showing their locations. Others turn them off to disguise the origins of the shipment.

McNally says in addition, satellite images that tanker tracking firms normally rely on to ascertain shipping traffic are no longer widely available.

Some satellite image providers have restricted images in conflict areas in the Middle East at the request of the U.S. government due to security concerns.

“I would say tanker trackers are hobbled by the fact that we no longer have high resolution commercial satellite imagery of transits,” he says.

“When they started turning off AIS and then we all asked ‘where is the satellite’ and we didn’t have satellite.”