Will gas prices fall if companies build oil routes that bypass the Strait of Hormuz? Experts explain
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Key Points:
- The near-closure of the Strait of Hormuz due to conflict has caused the largest global oil shock on record, pushing U.S. gasoline prices above $4 a gallon and contributing to inflation ahead of the November midterm elections.
- The Strait of Hormuz handles about 20% of global oil supply, but shipping traffic there has sharply declined since the conflict began, with average daily crossings dropping from over 100 to about 13 ships.
- Gulf nations are developing alternative pipelines and trade routes to bypass the Strait, including Saudi Arabia’s pipeline to the Red Sea and the UAE’s new pipeline to Fujairah, but construction will take several years and require substantial investment.
- These alternative routes could eventually restore most lost oil flow and reduce vulnerability to future disruptions, but they remain susceptible to attacks, especially from Iran-aligned groups like the Houthis in Yemen.
- Despite short-term challenges, Gulf countries have strong strategic incentives to diversify export routes and secure control over their oil supply chains to prevent future shocks.
