Jefferies highlights energy security risks after Strait of Hormuz crisis

Jefferies analyzed the impact of the Strait of Hormuz crisis, which threatened over a quarter of global oil supply and a similar share of liquefied natural gas (LNG). The crisis forced the energy system to rely on 55% of oil typically transported through Hormuz using bypass pipelines, increased production, and inventory releases, while curbing demand by around 6.8 million barrels per day.

Researchers identified six strategies to mitigate the crisis, potentially offsetting 35-70% of pre-crisis oil flows by 2030. These measures included electrification and clean energy adoption, coal substitution, alternative oil and gas supply sources, altered trade routes, expanded inventories, and demand management. However, even the most optimistic scenario falls short of replacing all pre-crisis flows.

The analysis revealed that 95% of the world's population resides in areas dependent on energy imports, with two-thirds of energy trade crossing maritime chokepoints and one-third crossing geopolitical lines. Major exporters like Australia, which is a major LNG exporter and diesel importer, remain vulnerable due to a mismatch between produced and consumed fuels.

Clean technologies have the potential to replace nearly 30% of current oil and gas use, which is roughly ten times the progress expected from the world's current trajectory by 2030. Importing economies are investing in electric vehicles, clean power, efficiency, and inventory management, while exporters are expanding production and exploring alternate routes. Some countries are even extending coal generation and investing in fossil infrastructure.

Energy security is becoming a permanent factor in investment decisions. Potential beneficiaries include bypass pipelines, LNG and regasification infrastructure, refinery reconfiguration, storage, and inventories, as well as grids, energy efficiency, electrification, and alternative oil and gas supply.