Geopolitics of the Mediterranean in the aftermath of Hormuz

The return of acute geopolitical risk to global energy markets is changing the way energy security is understood. The central question is no longer simply how to deliver energy as efficiently and cheaply as possible. Increasingly, it is how to ensure that energy continues to flow when normal sources, routes or infrastructure are disrupted. This represents a shift from the economics of “just-in-time” towards the security of “just-in-case”. For decades, energy systems increasingly prioritised efficiency: lowest-cost routes, minimal inventories, high asset utilisation and concentrated supply chains. But the disruptions affecting major energy-producing regions and maritime routes demonstrate the vulnerability of such systems. Efficient supply chains can also be brittle. In this new environment, ‘optionality’ has economic and strategic value.

Optionality is the ability to switch between alternative suppliers, routes, infrastructure, contractual arrangements and markets when disruption occurs. These alternatives may not always be the lowest-cost options under normal conditions. Their value lies in being available when they are needed. Two crises have changed global gas Natural gas provides a particularly striking example. Global gas markets have now experienced two major supply disruptions in four-years. Russia’s invasion of Ukraine in 2022 resulted in the loss of most Russian pipeline supplies to Europe. The Iran conflict has disrupted supplies from Qatar, driving LNG prices higher. Chevron’s Global Gas president, Freeman Shaheen, drew a clear conclusion from these events: they reinforce the need for diversity both of supply and contracting structures, particularly given that the LNG spot-market is considerably less liquid than crude and products. That is significant.…