Publications: The Petroleum Economics Monthly

The Strait of Hormuz: Of Diminished Importance (December 2011)

The title of this month’s report, “The Strait of Hormuz: Of Diminished Importance,” was meant to catch readers’ attention. Our thesis is quite simple: the strait’s importance to the global economy is declining rapidly. This conclusion will shock many, especially the retired generals and security types who have for years populated nonprofit research organizations such as Washington’s ubiquitous Center for Strategic and International Studies. These people have written countless papers and books on the threat to the global economy created by large oil volumes passing through Hormuz. In reality, the stature of Hormuz, while still important, has diminished. In future, the strait will be even less vital to the world oil market. For this reason, those following the market need to review the role of Middle Eastern oil, policies toward countries in the region, and the real—as opposed to perceived—threats linked to the loss of this shipping route.

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