Birol warns of deeper energy rupture

Global energy markets are facing a supply shock more severe than the oil crises of 1973 and 1979 combined with the gas disruption that followed Russia’s 2022 invasion of Ukraine, according to International Energy Agency executive director Fatih Birol, who said mounting losses of oil and liquefied natural gas from the Middle East were set to intensify through April.

Birol said more than 12 million barrels of oil had already been lost since the conflict widened around Iran and the Strait of Hormuz, with April expected to be markedly worse because some cargoes delivered in March had been contracted before the fighting escalated. He said shortages of jet fuel and diesel were already being felt in parts of Asia and were likely to spread into Europe in April or May, adding to inflationary pressure and weighing on growth across importing economies.

The remarks amount to one of the strongest warnings yet from the head of the Paris-based agency, which was created after the first oil shock of the 1970s to help major consuming countries coordinate emergency responses. On its own crisis tracker, the IEA now describes the present upheaval as the largest supply disruption in history and says governments are already resorting to conservation measures, subsidies and fuel-management steps to soften the blow for households and businesses.

That historical comparison is significant. The 1973 crisis followed the Arab oil embargo during the Yom Kippur war, while the 1979 shock was tied to turmoil after the Iranian Revolution. Both episodes reshaped energy policy for decades by exposing how heavily industrial economies depended on Middle East crude. Birol’s argument is that the current moment is broader in scope because it is hitting oil, LNG, shipping routes and refined products at once, rather than disrupting a single fuel stream.

The comparison with 2022 is also central. Europe spent that year and much of 2023 scrambling to replace lost Russian pipeline gas with LNG, storage mandates and demand cuts. The European Commission has pointed to those emergency measures as the model for how member states may again need to respond if the present disruption proves prolonged. Dan Jørgensen, the bloc’s energy commissioner, has warned that oil and gas prices may not quickly normalise even if the fighting ends soon, and Reuters has reported that Brussels is considering reviving tools first used during the Russian gas squeeze.

The immediate trigger this time is physical damage and restricted movement through one of the world’s most critical energy chokepoints. Birol said about 40 key energy assets in the Middle East had been damaged, and that restoring them would take time. The IEA chief has also said the agency is weighing another release from strategic reserves after member countries already agreed to a record 400 million-barrel drawdown, a sign that policymakers believe the market cannot rely on commercial flows alone to stabilise supply.

Even so, stock releases can only cushion the first impact. Analysts and policymakers are increasingly focused on the knock-on effects in transport and industry, especially where diesel and aviation fuel are concerned. Reuters has reported that governments from Spain to Japan are preparing support measures, while the IEA tracker shows countries including Egypt, Indonesia, Korea and India adopting conservation or rationing steps ranging from remote work to fuel-use limits and efficiency drives.

The economic consequences are already coming into view. Higher fuel bills threaten to feed consumer inflation just as many governments are trying to repair public finances after pandemic-era spending and the earlier energy support packages deployed in 2022. For Europe, the danger is not only direct import costs but also pressure on manufacturing, logistics and airlines if refined fuel shortages deepen. For Asia, where import dependence is high across several major economies, the strain could show up first in transport, power generation and industrial margins.

The crisis is also sharpening an older policy divide. One camp sees the turmoil as proof that countries should accelerate the shift away from fossil fuels and strengthen electrification, efficiency and domestic renewable capacity. Another argues that governments must first prioritise affordability and security, even if that means delaying some climate measures or extending emergency support for conventional fuels. Reuters, in a broader assessment of the shock, said that tension is emerging again across Europe as officials weigh immediate relief against longer-term transition goals.