Oil producers spent billions building pipelines around the Strait of Hormuz because Iran keeps threatening to close the Strait of Hormuz. Analysts now confirm the new pipelines are also vulnerable to Iran. The problem moved six hundred miles inland and kept the same name.
This counts as strategic planning in the energy sector.
The Strait handles about thirty percent of seaborne oil. Iran floats a closure threat every eighteen months like clockwork. Producers responded by laying pipe through deserts and mountains to dodge the chokepoint. Then someone checked whether Iran could hit pipelines. Turns out pipelines sit still and explode when you look at them wrong. Shipping lanes at least move.
Every technical analyst watching this trade knows the headline doesn't matter. Crude moves on inventory prints and dollar swings. Whether the barrels float through a strait or roll through a tube makes zero difference to the chart. But energy analysts needed something to analyze so they analyzed pipe vulnerability for six hundred billable hours.
Retail traders saw this headline and bought USO calls because the word Iran appeared near the word threat. They will lose money. They always lose money. The pipelines could run through a demilitarized petting zoo patrolled by armed kindergartners and these people would still find a way to buy at the top.
The Middle East has spent forty years building infrastructure to route around its own instability. Every bypass creates a new target. Every hedge generates a new risk. At some point you're just moving the same barrels through more expensive tubes while analysts justify their existence by pointing at maps.
Iran doesn't need to close the Strait anymore because everyone already priced in the threat and built alternatives that cost twice as much to operate. The pipelines work perfectly as long as nothing goes wrong, which in the Middle East happens every other Thursday.
Photo by Planet Volumes on Unsplash
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