Bessent Says Strait of Hormuz Obsolete Within Two Years

Treasury Secretary Scott Bessent says Gulf oil producers could bypass the Strait of Hormuz within two years, putting a remarkably short timetable on a pipeline buildout that has accelerated since the Iran war disrupted one of the world’s busiest oil routes.“That will be bypassed in two years,” Bessent said Tuesday during a discussion with Larry Kudlow at the G20 financial meetings in Asheville, North Carolina. He went further, predicting that “the Strait of Hormuz will be like a worthless piece of water” within that timeframe.Gulf producers are already spending money in that direction.Saudi Arabia pushed roughly 7 million barrels per day through its East-West pipeline to the Red Sea during the Hormuz shutdown, using Yanbu as an alternative export point. The route provided Saudi crude with a way around Hormuz, although tanker traffic through the Red Sea later faced its own problems from Houthi attacks near Bab el-Mandeb.The UAE has a more direct workaround. ADNOC plans to build its West-East 1 Pipeline and double oil export capacity through Fujairah, which sits outside Hormuz, from 1.8 million bpd to 3.6 million bpd. The project is expected online in 2027.Iraq is pursuing several exits of its own. A proposed pipeline through Syria to the Mediterranean could cost at least $15 billion and take four years to build. Iraqi officials are also discussing repairs to an older Syria pipeline and increased shipments through the Kirkuk-Ceyhan system into Turkey.Kuwait has discussed connecting its oil infrastructure with Saudi Arabia and the UAE, giving its crude access to Fujairah or Red Sea ports. Japan, heavily dependent on Middle Eastern crude, has agreed to participate financially in Gulf pipeline projects.The incentive got another reminder Monday. Two tankers attempting to leave Hormuz were struck by projectiles, according to maritime security consultant Marisks, following another exchange of strikes between Iran and the United States.Bessent’s two-year forecast would require several of these projects to move quickly. The investment already underway shows Gulf producers are no longer treating Hormuz bypass capacity as a contingency plan. They are building it into the export system.By Julianne Geiger for Oilprice.comMore Top Reads From Oilprice.comTwo Supertankers Hit by Unknown Projectiles in Strait of HormuzRussia Doubles Dark Fleet to Ship LNG to AsiaU.S. Energy Storage Capacity Installations Hit Record High in Q2