Forget high gas prices. It’s oil shortages that are going to break us

Closing the Strait of Hormuz has ripped a permanent hole in the global supply chain

Global oil markets are no longer just facing high prices. They are running out of emergency reserves.

Commercial oil inventories are falling at a record pace as the Strait of Hormuz blockade continues to choke global supply. The narrow waterway handles roughly one-fifth of the world’s oil trade, making it one of the world’s most critical energy chokepoints. The International Energy Agency says stockpiles now hold only weeks of coverage, raising fears the world may be moving from an oil-price problem to an oil-security problem.

Previous Middle East crises usually pushed prices sharply higher before markets stabilized and supply resumed. This time looks different.

JPMorgan warns commercial inventories in developed economies are approaching operational stress levels. Saudi Aramco says gasoline and jet fuel inventories could soon become critically low. Rapidan Energy goes further, warning that if stockpiles continue falling at the current pace, parts of the global economy could begin seizing up as transportation systems struggle to secure fuel at any price. The problem is no longer simply expensive oil. It is the growing risk of physical shortages.

Oil markets are already showing signs of strain. Roughly 14 million barrels per day of exports from Saudi Arabia, Iraq, Kuwait and the UAE have been disrupted since the Strait of Hormuz was effectively shut. Analysts estimate the disruption has already removed the equivalent of billions of barrels of annual supply from global markets. Some analysts now see this as one of the most serious supply disruptions modern energy markets have faced.

The implications go far beyond crude prices. Modern economies depend on continuous fuel availability. Airlines, trucking fleets, shipping lines, agriculture, manufacturing and emergency services all rely on stable petroleum supplies. Once inventories fall below critical operational levels, the issue becomes physical availability, not affordability. At that stage, shortages begin affecting transportation, supply chains and consumer prices.

That is why analysts increasingly believe prices may need to rise dramatically simply to destroy demand. Rapidan Energy argues severe economic contraction is now more likely than a complete depletion of inventories because economies would slow sharply before stockpiles fully run dry. Despite signs of demand destruction, global consumption still remains above available supply.

Markets remain volatile because nobody knows how long the Strait crisis will continue. U.S. President Donald Trump continues sending mixed signals regarding negotiations with Iran, while tanker movements through the region remain inconsistent. Some vessels have been allowed to leave the Strait intermittently, but normal energy flows have not resumed.

Washington’s recent reversal on Russian oil sanctions also underscores the seriousness of the situation. After initially allowing waivers on Russian oil sales to expire, the U.S. quietly granted a 30-day extension to countries importing Russian crude already at sea. The move reflected growing concern that global energy markets are becoming increasingly fragile.

Even if the Strait of Hormuz reopens soon, the damage to global energy markets will not disappear quickly. Oil fields shut during the crisis cannot instantly resume full production. Woods Mackenzie estimates some southern Iraqi fields could require nine months merely to recover to 85 per cent of prewar production levels.

The same problem applies to inventories. IEA member countries are releasing roughly 400 million barrels from emergency reserves to stabilize markets. Those reserves will eventually need to be rebuilt, prolonging tight supply conditions long after the immediate crisis passes.

Liquefied natural gas markets also face prolonged disruption. Damage to Qatar’s Ras Laffan LNG infrastructure could take more than a year to repair, further tightening global energy supplies fully.

Goldman Sachs expects Brent crude to average around US$90 per barrel in the fourth quarter even under the optimistic assumption that Persian Gulf exports normalize relatively quickly. If disruptions persist longer, prices could move substantially higher. Tight energy markets and elevated prices could persist well into 2027.

For Alberta, the implications are significant. After years of discounted pricing, constrained infrastructure and political hostility toward the energy sector, the province suddenly finds itself holding one of the world’s most valuable strategic assets: stable North American oil supply. Prime Minister Mark Carney’s recent signals supporting new pipeline capacity, if he actually follows through on his promises, only strengthen Alberta’s long-term position.

The world is relearning a lesson it periodically forgets. Energy security matters. And as global energy markets grow increasingly fragile, countries with reliable oil supplies become far more important than governments once liked to admit.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.