Jefferies highlights energy security risks after Strait of Hormuz crisis

Investing.com - Jefferies hosted McKinsey's Global Energy & Materials team to discuss findings from their report on the Strait of Hormuz crisis, which exposed more than 20% of global oil supply and a similar share of LNG to disruption. The energy system absorbed approximately 55% of the roughly 21 million barrels per day of oil that previously moved through Hormuz using bypass pipelines, additional production, and inventory releases, while lower consumption accounted for roughly 6.8 million barrels per day.

McKinsey identified six broad responses that could offset 35-70% of pre-crisis Hormuz oil flows by 2030, including electrification and clean energy, coal replacement, alternative oil and gas supply, rewired trade routes, expanded inventories, and demand management. New bypass pipelines could provide the largest offset, while supply growth outside the Gulf is likely to remain incremental. Even at the high end of the analysis, these measures fall short of replacing all pre-crisis flows.

Approximately 95% of the global population lives in a region dependent on energy imports, with two-thirds of energy trade crossing at least one maritime chokepoint and one-third crossing geopolitical lines. Major exporters like Australia remain exposed because the fuels they produce do not always match those they consume, as Australia is a major LNG exporter but a major diesel importer.

Existing clean technologies could technically displace nearly 30% of current oil and gas use, roughly 10 times the progress implied by the world's current trajectory through 2030. Importing economies are pursuing electric vehicles, clean power, efficiency, and inventories, while exporters are expanding production and alternate routes, with some countries extending coal generation and investing in fossil infrastructure.

Jefferies said energy security is becoming a permanent investment consideration, with potential beneficiaries including bypass pipelines, LNG and regasification infrastructure, refinery reconfiguration, storage and inventories, grids, energy efficiency, electrification, and alternative oil and gas supply.

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