“Energy independence and energy security are really two different things.”
-Rex Tillerson, former CEO of ExxonMobil
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“We are looking at what is by far the biggest disruption in world history in terms of daily oil production."
-Daniel Yergin, arguably the world's foremost energy expert
The SAFE Premium: An Emphasis on Energy Security
TLDR Summary:
Energy markets spent three decades pricing supply by cost, not security. Deepwater drilling and, particularly, the surge in U.S. shale oil and gas production, created so much abundance that the origin of energy mattered far less than price, compressing the geopolitical “security premium.”
Recent conflicts, particularly around Iran and key maritime chokepoints, are forcing markets to reconsider that assumption. Roughly 20% of global oil flows through the Strait of Hormuz, reminding buyers that delivery routes matter as much as supply itself.
Energy markets are beginning to price the topology of supply chains, not just the quantity of supply. How energy moves through the system (routes, chokepoints, infrastructure) is becoming as important as how much exists.
