How does today’s energy crisis compare with past shocks?

The New Era of Energy Volatility: Supply vs. Price

For decades, the global community measured energy crises by the spike in prices at the pump or on utility bills. However, current data suggests a fundamental shift in how we define a “worst-case scenario.” While price shocks are the most visible symptom, the current crisis is defined by an unprecedented scale of supply disruption.

According to energy systems expert Prof Brian Ó Gallachóir of University College Cork (UCC), the current disruption is the largest on record when measured by volume. The scale is staggering: disruptions in the Strait of Hormuz are estimated at around 20 million barrels per day. To put this in perspective, This represents more than four times the 4.5 million barrels per day disrupted during the 1970s oil crises.

Despite this massive supply hit, the economic impact has not yet surpassed the peaks of 2008 or 2022. This is largely due to market hedging—where suppliers agree on prices in advance—which creates a lag before price increases reach the average consumer.

Why Global Chokepoints are the New Flashpoints

The current crisis highlights a critical vulnerability in global energy security: the reliance on narrow shipping chokepoints. The conflict in the Middle East has put immense pressure on the Strait of Hormuz, a vital artery through which a significant share of the world’s oil passes.

Industry experts warn that as long as these key routes remain contested or closed, the risk of a prolonged cost-of-living crisis remains high. The International Energy Agency (IEA) has characterized the current situation as exceptional, with Executive Director Dr Fatih Birol describing it as “two oil crises and one gas crisis” occurring simultaneously.

The Role of Strategic Buffers

To prevent a total collapse of supply, the IEA has implemented the largest release of strategic oil reserves in history, pumping 400 million barrels into the market. This mechanism is designed to dampen the impact of production or supply restrictions, acting as a temporary shock absorber for the global economy.

Breaking the “End of the Pipe” Cycle

The current crisis serves as a stark warning for nations with high import dependencies. Ireland, for example, remains particularly exposed, importing approximately 80% of its energy. The vulnerability is even more acute for gas, where Ireland imports more than 80% of its supply—a resource that accounts for roughly half of the country’s electricity generation.

Sean Casey, EY’s UK and Ireland energy and infrastructure lead, describes this position as being “at the end of a pipe.” This geographical and infrastructural vulnerability means that while a country might be sheltered from physical shortages, it remains completely exposed to international price movements.

The trend moving forward is clear: the only sustainable path to security is a rapid transition toward renewable energy and enhanced energy efficiency. By reducing the need for imported oil and gas, nations can insulate themselves from the geopolitical volatility of the Middle East and other volatile regions.

Will the Crisis Get Worse?

Whether this becomes the “worst ever” crisis depends on the lens used for measurement. In terms of volume, the record has already been broken. In terms of price, the full impact may still be looming.

Prof Ó Gallachóir suggests that the price effect could still peak, noting that the situation is likely to worsen if the Strait of Hormuz remains closed. As hedging contracts expire and the reality of supply shortages sinks in, the distinction between “supply disruption” and “price shock” may disappear.

Frequently Asked Questions

Is the current energy crisis worse than the 1970s shock?

In terms of the volume of oil disrupted (20 million barrels per day vs 4.5 million), yes. However, in terms of price spikes and immediate economic impact, it has not yet surpassed some past shocks.

What is causing the current fuel price increases?

The crisis is driven by escalating conflict in the Middle East, specifically the US-Israel war on Iran, which has disrupted energy infrastructure and key shipping routes like the Strait of Hormuz.

Why aren’t consumers feeling the full price increase immediately?

This is due to hedging, a practice where energy suppliers agree on prices in advance to protect against sudden market changes, delaying the flow-through to consumer costs.

How is the IEA attempting to stabilize the market?

The IEA has coordinated the release of 400 million barrels of strategic oil reserves, the largest such release in history, to cushion the impact of supply restrictions.