Elon Musk Says Relying on the Strait of Hormuz Is ‘Lazy’ but What Can We Really Do to Change?

We’re living on the cusp of a golden age of AI. Multinationals are investing billions on digital transformation projects, we’re trying to get machine learning to do all our heavy lifting, and big tech seems to unveil a shiny new toy every couple of weeks. 

That’s probably why a lot of thought leaders talk like our society has already transcended the physical constraints of the 20th century. Yet for all that boisterous talk and fancy gadgets, the entire global economy is still completely reliant on a 29-mile-wide strip of water called the Strait of Hormuz.

The U.S./Israeli war in Iran is now dragging into its second month, and the only card Iran has left is to block this tiny waterway. Unfortunately for the rest of us, that tiny waterway is responsible for about 25% of the world’s oil supply. And disrupting it is relatively easy for Iran to do. The bottleneck has now got Brent Crude (CBM26) flirting around the $110 mark, and world leaders are scrambling to try and get the tankers moving again.

Well, you can bet your bottom dollar that Elon Musk has a different take on all this. Responding to a post on X last week that questioned why so many countries pin their supply chains on the Strait of Hormuz, Musk simply said, “We got lazy”.

Just like everything else Elon Musk says and does, you’ve got to add a pinch of salt to this. After all, there are decades and decades worth of historical context to unravel here. But does he have a point about how we’ve ended up in this energy crisis? And, more importantly, is it too late to do anything about it?

Is it Really “Lazy” to Rely on the Strait of Hormuz?

To understand why the SpaceX billionaire is calling the world “lazy” right now, we’ve got to zoom out for a minute and look at the bigger picture.

The Strait of Hormuz is the main export route for the huge amount of oil and liquefied natural gas (LNG) produced by Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, Bahrain, and Iran. That’s a long list of countries, and together they export around a quarter of the world’s seaborne oil supply. Bearing that in mind, you can see why it’s an issue that 90% of tanker traffic has stopped because of the war in Iran.

And that bottleneck has had a domino effect on production. QatarEnergy has had to declare force majeure on LNG contracts, and Saudi Aramco has shut down major offshore fields like Safaniya because there aren’t enough tankers to haul the oil away. That means we’re going to continue to suffer supply shortages even after the Strait gets reopened.

But believe it or not, this isn’t just about oil. Qatar is also one of the world’s biggest exporters of helium, which is a critical resource for the manufacturing of all those AI semiconductors that big tech is trying to push out. So, in addition to an energy crisis, this standoff in the Middle East is also choking the global AI revolution.

To be honest, that’s probably the only reason that Elon Musk is weighing in now. And while his involvement may be self-serving, his accusations of laziness aren’t totally wrong.

For the last 50 years or so, there’s been a systematic failure to build redundancy in the Middle East. Pipelines are slow and expensive, and cheap Gulf LNG has totally disincentivized energy independence. It’s always been cheaper and easier to ship through the Strait of Hormuz and hope this regional cold war didn’t heat up. 

Translation: Big global economies chose efficiency over resilience, which admittedly was a little lazy. Now we’re effectively paying the price of that laziness via a choke point tax. The trillion-dollar question: is it too late to do anything about it?

What Can We Really Do to Change?

The good news is that there are alternatives to the Strait of Hormuz. The bad news is that scaling up those alternatives will be costly and time-consuming. Yet in order to diversify supply chains and regain a sliver of energy independence, the West genuinely does need to put its money where its mouth is.

The most promising investment right now is to construct a new canal through the UAE. This 116 km “inland maritime corridor” would connect Sharjah with Fujairah, creating a direct connection between the Persian Gulf and the Arabian Sea. That means a huge chunk of the world’s seaborne oil exports could totally bypass the Strait of Hormuz.

This sounds like a great idea, but there are plenty of kinks to work out. 

This canal is only in its conceptual stages and will take quite a while to dig if the project does get pushed ahead. It’s also going to cost an estimated $100 billion to construct and get online. Not to mention it would be yet another static target still well within range of Iranian missiles and drones. Then again, that all sounds like a bargain when you remember that we’re losing $200 billion worth of economic growth we’ve lost thanks to the war. So, if the West is serious about ditching this reliance on the Strait of Hormuz, they should be lining up to invest.

Meanwhile, governments and big corporations have got to start playing the long game. The only way to make the Strait genuinely irrelevant is to decouple our industrial heat and electricity supply from LNG—and nuclear power looks like the cheapest and most efficient way forward here.

Ask any big energy company, and they’ll tell you small modular reactors (SMRs) are the next big thing. Amazon (AMZN) is leading the way. It’s already signed off on plans to build its own modular reactors in Washington and Virginia, amounting to some $500 million worth of investment. Alphabet's (GOOG) (GOOGL) Google is aiming to be nuclear-powered by 2030, and major supplier Centrica (CNA.LN) has partnered with X-Energy to start deploying modular reactors in the UK.

Building nuclear reactors is more complicated and more expensive than digging a canal, sure. But if energy independence is the goal, SMRs look like the most sustainable way to regain control and shed Elon Musk’s accusations of laziness. We just need more governments and the multinationals they serve to take the plunge.

So, for the most part here, Musk is spot on. 

We have been lazy, and we’ve wasted decades enjoying the benefits of just-in-time energy without building any safeguards to protect it. The position we currently find ourselves in should serve as an important wake-up call. It’s time for the West to invest in the infrastructure we need to declare energy independence—otherwise, we’re just going to keep doing this same dance over and over again every few years.