The strategic role of the Strait of Hormuz in global oil supply

Nestled between Oman and Iran, the Strait of Hormuz serves as a crucial gateway connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea.

This narrow passage is not just a geographic feature but the world’s most critical oil chokepoint, with an astonishing 21 million barrels per day (b/d) of oil passing through in 2022—approximately 21% of global petroleum liquids consumption.

Chokepoints like the Strait of Hormuz are narrow channels along vital global sea routes essential for maintaining energy security.

A disruption, even temporary, can lead to significant delays in oil supply and increased shipping costs, which in turn elevate global energy prices.

While alternative routes exist for some chokepoints, they often result in longer transit times, and for others, like the Strait of Hormuz, practical alternatives are limited.

The volume of oil flowing through this strait surged by 2.4 million b/d from 2020 to 2022 as demand rebounded post the economic slump triggered by the COVID-19 pandemic.

According to data published in the EIA, in the first half of 2023, there was a slight dip in shipments of crude oil and condensates, primarily due to production cuts implemented by OPEC+ members starting in November 2022.

The Strategic Role of the Strait of Hormuz

Saudi Arabia the largest exporter of crude oil through the Strait of Hormuz

Saudi Arabia and the United Arab Emirates (UAE) have developed pipelines that can bypass the Strait, reducing reliance on this critical passage.

Tanker tracking data from Vortexa indicates that Saudi Arabia exports more oil through the Strait than any other country, mostly destined for markets in Asia—China, India, Japan, and South Korea being the primary recipients.

These four countries alone accounted for 67% of all crude oil and condensate flows through the Strait in 2022 and the first half of 2023.

Understanding the dynamics of the Strait of Hormuz is essential not just for those directly involved in the oil industry but for anyone concerned with the stability of global energy supplies.

As geopolitical tensions fluctuate, the importance of alternative routes and strategies to mitigate disruption risks becomes increasingly significant, highlighting the intricate balance of global energy logistics.

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