For months, the central question hanging over international energy markets has been straightforward.

When will the Strait of Hormuz reopen?

Increasingly, another question needs to be asked.

What happens if the world stops waiting?

Saudi Arabia is developing ways of moving more oil around the disrupted strait.

The United Arab Emirates has expanded alternative export arrangements.

Major Chinese shipping companies are collecting oil outside the Gulf rather than sending their own tankers through dangerous waters.

And now Iraq has approved new mechanisms designed to get more of its crude to international customers through alternative export arrangements.

Taken individually, these are emergency responses.

Taken together, they begin to look like something larger.

The world's oil producers, refiners and shipping companies are gradually constructing a petroleum trading system capable of functioning with a severely constrained Strait of Hormuz.

For Australia, that is both reassuring and concerning.

It reduces the risk that Asian refineries supplying our petrol, diesel and aviation fuel simply run out of crude.

But the replacement system is longer, more complicated and frequently more expensive.

Australia may therefore be moving from the immediate danger of fuel scarcity towards a longer period of fuel availability at a higher structural cost.

That could become one of the most important economic legacies of the Iran war.

Iraq is the latest country to adapt

Iraq's response is particularly significant.

The country has been heavily dependent on Gulf export infrastructure and therefore acutely vulnerable to disruption in Hormuz.

Reuters reports the Iraqi cabinet has now approved mechanisms allowing crude exports through specialised international and domestic companies using multiple alternative export outlets.

The new contracts are due to operate for three months beginning September 1.

This is not a permanent replacement for Iraq's enormous normal Gulf export system.

But it demonstrates a change in thinking.

Iraq cannot simply wait indefinitely for Hormuz to return to normal.

It has to sell oil.

Customers need to buy it.

Revenue has to flow.

Production needs somewhere to go.

So another workaround is being created.

Iraq is thinking much further ahead as well

The short-term arrangements are only part of the story.

Iraq is also examining a much larger strategic project: a new crude pipeline through Syria to the Mediterranean.

Reuters reports the proposed pipeline could eventually transport as much as 2 million barrels a day, although it would potentially cost at least US$15 billion and take approximately four years to construct.

The old Kirkuk-Banias pipeline is reportedly too badly deteriorated to provide the required solution.

Four years obviously provides no answer to today's fuel crisis.

But strategically it tells us something important.

Countries are beginning to consider infrastructure that would reduce their exposure to Hormuz not for the next month, but potentially for decades.

Saudi Arabia has already been adapting

Saudi Arabia possesses an advantage many Gulf producers do not.

It has infrastructure capable of moving crude westwards across the Arabian Peninsula.

Its East-West pipeline connects eastern production areas with Red Sea export infrastructure.

That gives Saudi Arabia an alternative to putting every export barrel through Hormuz.

More recently, Saudi Aramco has also begun offering Asian refiners cargoes using ship-to-ship arrangements outside the Strait.

And there has been another potentially encouraging development.

Saudi Arabia resumed some crude loadings from terminals inside Hormuz between August 12 and 16.

Three very large crude carriers, each capable of carrying about two million barrels, loaded from Saudi terminals during that period, according to Reuters.

That means Saudi Arabia is effectively pursuing both strategies.

Try to use Hormuz where possible — and build alternatives when it is not.

But Saudi Arabia has another chokepoint problem

Unfortunately, bypassing one maritime risk can lead directly towards another.

Saudi Arabia's western export routes rely on the Red Sea.

That means exposure to disruption around Bab el-Mandeb and Houthi attacks.

Reuters reports Saudi exports through the alternative Mediterranean route at Sidi Kerir in Egypt remain relatively limited, partly because longer journeys and high freight costs make the arrangement less attractive to Asian customers.

This illustrates the fundamental problem.

There are alternatives to Hormuz.

There are few alternatives as simple and efficient as Hormuz was before the war.

The UAE was better prepared

The United Arab Emirates has another important advantage.

Its crude pipeline to Fujairah allows oil to reach an export terminal on the Gulf of Oman side of the Strait.

That means tankers can load some UAE crude without entering Hormuz at all.

ADNOC has expanded the use of Fujairah and ship-to-ship transfers as the conflict has continued.

The UAE's strategy demonstrates why infrastructure built before a crisis can become enormously valuable during one.

A pipeline that appears like expensive redundancy during normal times becomes strategic insurance when the normal maritime route stops functioning.

That lesson should not be lost on Australia.

China is changing the other side of the transaction

The adaptation is not confined to oil producers.

Customers are changing too.

Two major Chinese state-owned shipping companies have stopped sending their tankers through Hormuz and Bab el-Mandeb.

Instead, crude is being collected through ship-to-ship transfers outside the Gulf, including around Fujairah and Oman.

These are not minor operators.

Reuters reports the two companies previously transported about half of China's Middle Eastern crude imports.

That is an extraordinary change in global oil logistics.

The buyer is effectively saying:

We still want Middle Eastern oil.

But we do not want our ships entering the dangerous part of the supply chain.

The producer or intermediary therefore has to bring the oil out to us.

And there is a price for doing that

The economics are revealing.

Reuters reports tanker freight rates from Oman to China have risen to around US$140,000 per day per vessel, roughly four times earlier levels.

Longer journeys are also reducing vessel utilisation.

This is the recurring theme of the Iran energy crisis.

The market finds a solution.

The solution works.

And the solution costs more.

That is why the continuing availability of oil should not be confused with a return to normality.

Japan demonstrates the same phenomenon

Japan provides another useful example.

Japanese refiner Idemitsu has begun sourcing Saudi crude through alternative routes involving Suez and the Cape of Good Hope.

The company says supply remains stable.

That is reassuring.

But the voyage that previously took around 20 days can now take 50 to 60 days using some alternative routes.

The oil arrives.

But a tanker can spend two or three times as long completing the journey.

That ties up shipping capacity.

It consumes more fuel.

It increases financing and logistics costs.

It makes inventory management more difficult.

Again, resilience has a price.

Australia sits downstream of all of this

Australia does not need to import its crude directly through Hormuz to be exposed.

Our dependence is indirect but substantial.

Australia imports most of the refined petroleum products it consumes.

A large proportion comes from Asian refining centres.

Those refineries require crude.

If Asian refiners can continue obtaining Middle Eastern, American, African and other crude, Australian fuel supply becomes considerably more secure.

That is the good news.

The bad news is that those refiners may be paying considerably more to obtain and transport it.

Australia eventually participates in those economics.

The danger of actual scarcity may be diminishing

This distinction deserves emphasis.

The emerging alternative supply system potentially makes a severe physical Australian fuel shortage less likely.

That is important.

Oil producers have found routes.

Asian refiners have diversified supply.

Shipping companies have adapted.

Governments have strengthened inventories.

Australia itself is building larger strategic fuel buffers.

Markets are extraordinarily good at finding solutions when prices provide sufficient incentive.

The Iran war has demonstrated that adaptability.

The world has not stopped because Hormuz stopped working normally.

But the price problem may persist

The question becomes:

At what cost?

A barrel moved through a pipeline to another coast has handling costs.

A barrel transferred between vessels has costs.

A tanker making a 50-day journey instead of a 20-day journey has costs.

War-risk insurance has costs.

Additional storage has costs.

Paying a premium to secure replacement crude has costs.

Building new pipelines has costs.

Holding larger inventories has costs.

Each individual cost may appear manageable.

Collectively, they alter the economics of the petroleum supply chain.

Brent is already above US$91

The international crude market is reflecting some of that uncertainty.

Brent was trading around US$91.28 a barrel on Wednesday, its fourth consecutive session of gains.

The United States says Hormuz is open.

Iran says it remains closed.

Peace negotiations have stalled.

That extraordinary disagreement over the status of one of the world's most important shipping corridors demonstrates how far conditions remain from normal.

But Brent itself still does not tell the whole story.

Freight costs matter.

Refinery margins matter.

Diesel prices matter.

Jet-fuel prices matter.

Insurance matters.

The Australian dollar matters.

Australia buys finished fuel, not an abstract crude benchmark.

This may become the new normal for a while

Reuters analysis now suggests oil markets are increasingly pricing a prolonged Hormuz crisis rather than assuming a rapid return to pre-war conditions.

Oil flows through the Strait remain dramatically below normal levels, inventories have been depleted and refinery capacity is under pressure.

That changes business behaviour.

A company will tolerate an inefficient workaround for a week.

It may accept one for a month.

But if disruption appears likely to persist for a year, investment decisions begin changing.

Temporary logistics become contracts.

Contracts become infrastructure.

Infrastructure becomes a new trading system.

We may now be watching the early stages of that process.

That is what makes Iraq important

Iraq's latest announcement matters less because of the precise number of barrels it moves next month.

It matters because another major Gulf producer has accepted that waiting may no longer be an adequate strategy.

Saudi Arabia is adapting.

The UAE is adapting.

Iraq is adapting.

China's shipping companies are adapting.

Japanese refiners are adapting.

The global petroleum market is beginning to reorganise around the problem.

Hormuz remains enormously important.

But dependence on it is becoming something governments and businesses actively want to reduce.

There is an Australian lesson in that

Australia should pay close attention.

The central lesson is not that Australia needs a pipeline around Hormuz.

It is that redundancy has value.

For years, global supply chains were optimised primarily for efficiency.

Lowest cost.

Fastest route.

Minimum inventory.

Maximum utilisation.

That model works brilliantly when the system works.

The Iran war demonstrates what happens when a critical link fails.

Suddenly the second-best route becomes enormously valuable.

The spare storage tank becomes valuable.

The alternative supplier becomes valuable.

The domestic refinery becomes valuable.

The strategic reserve becomes valuable.

Australia's new fuel reserve follows the same logic

The Federal Government's planned $3.2 billion Australian Fuel Security Reserve should be viewed through precisely this lens.

Holding around a billion litres of government-owned fuel will cost money.

Storage costs money.

Managing inventories costs money.

During ordinary times, that can appear inefficient.

During a severe international disruption, the reserve buys time.

And time allows alternatives to be found.

That is exactly what the global oil industry has been doing during the Hormuz crisis.

Domestic refining deserves the same assessment

Australia's remaining refineries are also part of the resilience equation.

Domestic refining does not make Australia independent.

Refineries still require feedstock.

But they provide another option.

Australia's strategic question should therefore not be whether domestic refining is always the absolute cheapest way of obtaining every litre of fuel.

It should include the value of having domestic capability when the cheapest international supply chain becomes unavailable.

Efficiency and resilience are not always the same thing.

Alternative fuels become more valuable too

The same logic applies to sustainable aviation fuel, renewable diesel and electrification.

Every economically viable transport task that can move away from imported petroleum reduces Australia's exposure to international oil disruption.

An electric vehicle powered from the Australian electricity system does not care whether Hormuz is open.

A domestically produced litre of sustainable aviation fuel is less dependent on an overseas refinery.

Neither eliminates Australia's petroleum requirement.

But both diversify it.

And diversification is precisely what Gulf oil producers are now discovering they need.

This does not mean globalisation has failed

Quite the opposite.

The remarkable feature of this crisis is how successfully international trade has adapted.

American oil is travelling to Asia.

African crude is moving east.

Saudi oil is being moved through alternative ports.

UAE crude is leaving from Fujairah.

Chinese tankers are collecting cargoes outside dangerous waters.

Japan is sourcing oil through dramatically longer routes.

Iraq is creating new export mechanisms.

Globalisation has not failed.

It has demonstrated extraordinary flexibility.

But flexibility costs money.

That cost eventually becomes inflation

For Australia, this returns us to the familiar economic consequence.

Higher crude costs.

Higher freight.

Higher insurance.

Higher refining margins.

Higher diesel.

Higher jet fuel.

Higher domestic freight.

Higher business costs.

Eventually some of those costs reach consumers.

The Reserve Bank cannot shorten a tanker journey.

It cannot build an Iraqi pipeline.

It cannot make Hormuz safe.

But if the resulting costs become embedded in Australian inflation, monetary policy still has to deal with the consequences.

That is why the restructuring of global oil trade matters here.

Fuel security is becoming fuel affordability

The nature of the Australian risk may therefore be changing.

At the beginning of the crisis, the frightening question was:

Will Australia have enough fuel?

Increasingly, the answer appears likely to be yes.

Australia is a wealthy customer.

Alternative supply chains exist.

The government is strengthening reserves.

Global producers are finding new routes.

Asian refiners are finding new crude.

That is reassuring.

But the next question is:

How much will reliable fuel cost?

That may prove harder to answer.

There is a difference between available and cheap

Markets can solve shortages through price.

When something becomes scarce, its price rises.

Higher prices attract supply.

Consumers reduce demand.

Alternatives become viable.

Eventually the market balances.

That process means a product can remain available precisely because it has become expensive enough to justify extraordinary measures to supply it.

That appears increasingly relevant to petroleum.

Australia may avoid a severe shortage because somebody is willing to move oil halfway around the world, transfer it between ships and deliver it through alternative ports.

That is a success.

It is not necessarily a cheap success.

Hormuz will still matter enormously

None of this makes the Strait irrelevant.

A genuine reopening would still be the best economic outcome.

Normal tanker traffic would reduce pressure on alternative routes.

Freight rates could fall.

Insurance costs could ease.

Asian refiners could return to more efficient supply arrangements.

Inventories could rebuild.

Refined-product markets could normalise.

The emerging bypass system is an insurance policy.

It is not necessarily a superior replacement for the old system.

But the old system may never return completely

This is where the longer-term implications become fascinating.

Even if Hormuz eventually reopens fully, governments and companies have now experienced what happens when dependence on it becomes a liability.

Saudi Arabia has demonstrated the value of alternative pipelines.

The UAE has demonstrated the value of Fujairah.

Iraq is considering Mediterranean alternatives.

Asian refiners are discovering new suppliers.

Chinese shipping companies are developing new operating models.

Once businesses spend billions developing alternative infrastructure and relationships, some of those changes may remain after the crisis ends.

The Iran war could therefore permanently alter global petroleum trade.

Australia should learn the same lesson

Australia should not aim for energy isolation.

That would be economically irrational.

International trade gives Australia access to enormous quantities of efficiently produced fuel and other goods.

The objective should be different.

Avoid having only one answer.

Multiple suppliers.

Larger reserves.

Domestic refining capability.

Alternative fuels.

Electrification where practical.

Diversified shipping arrangements.

More resilient supply chains.

The Gulf states are now paying enormous sums to create exactly that kind of redundancy.

Australia has the opportunity to learn from their experience without replicating their crisis.

The Times View

For months, the world waited for the Strait of Hormuz to reopen.

Now the world is beginning to build around it.

Saudi Arabia is using alternative export arrangements while cautiously resuming some Gulf loadings.

The UAE has expanded exports outside the Strait.

Iraq has approved new mechanisms for alternative crude exports beginning in September and is examining a much larger Mediterranean pipeline for the future.

Major Chinese shipping companies are collecting oil outside dangerous Gulf waters rather than sending their own tankers through.

Japanese refiners are accepting dramatically longer journeys to maintain supply.

That is an extraordinary transformation.

And for Australia, it contains both good and bad news.

The good news is that the world's energy system is proving remarkably difficult to break.

Oil is finding another way.

Asian refineries can continue operating.

Australia can continue obtaining petrol, diesel and aviation fuel.

The bad news is that another way is not necessarily the cheapest way.

Longer voyages, ship-to-ship transfers, alternative ports, war-risk insurance, strategic inventories and new pipelines all cost money.

Australia may therefore emerge from the immediate danger of fuel scarcity only to confront a more persistent problem of fuel affordability.

The Strait of Hormuz remains one of the world's most important energy corridors.

But something fundamental has changed.

Governments and companies are no longer simply asking when it will reopen. They are asking how to make sure they are never this dependent upon it again.

Australia should be asking itself exactly the same question.