Energy Security Is Reshaping the Transition Debate

The Strait of Hormuz has made the risks of concentrated supply routes plain. Before the war, roughly one-fifth of global oil and liquefied natural gas trade passed through the waterway. Saudi Arabia and the United Arab Emirates are expanding infrastructure to move more oil to ports outside the Persian Gulf. HSBC CEO Georges Elhedery suggested that alternative routes could make Hormuz largely redundant for oil within five years, though LNG would remain more dependent on the strait.

Saudi Arabia and Singapore also announced on October 26 plans for crude storage at Singapore’s Jurong Rock Caverns, with operations expected in the second half of 2027. The arrangement is intended to strengthen Singapore’s energy security and make Saudi supply chains in Southeast Asia more resilient. Qatar, which has few alternatives to shipping LNG through Hormuz, has meanwhile secured long-term U.S. supply. QatarEnergy announced a 20-year agreement for up to 3 million metric tons a year from Woodside Energy’s Louisiana LNG project, with deliveries expected to start in 2030. Canada’s LNG Canada approved Phase 2 in September, doubling planned capacity at Kitimat from 14 million to 28 million metric tons annually.

Europe’s experience highlights the price effects of supply shocks. After replacing much of its Russian pipeline gas with LNG following Russia’s invasion of Ukraine, Europe faced another jump in gas prices as Middle Eastern supplies were disrupted. Its benchmark price rose above €100 per megawatt-hour in late October for the first time since 2022. Policymakers have kept their climate goals, but heating costs, fuel availability and electricity prices have regained urgency.

Reliability is also changing investment choices in the United States. On October 27, the Department of Energy announced a conditional loan commitment of up to $5 billion for nuclear upgrades and modernization at Constellation Energy plants in Illinois, Maryland and Pennsylvania. DOE says the work could add nearly 1.1 gigawatts of capacity. At the same time, rising electricity demand and aging transmission infrastructure have sharpened attention on grid expansion, storage, demand response and distributed generation. The common concern is whether power can be delivered where demand is growing, not simply whether it can be produced.

The crisis has not shown that renewables have failed or that fossil fuels have won. It has underscored the value of combining resources with different strengths: renewables, nuclear power, gas, batteries, pipelines and transmission. Redundancy can cost more than a system built with little spare capacity, but disruptions can make that leaner system far more expensive. Energy policy is increasingly being judged by whether supply is dependable, diversified and available when consumers need it.