Oil and gas industry expected surplus – but war brought shortage instead

In 2023, the International Energy Agency predicted that by 2028 . Prices responded to that and similar projections of slowing oil demand, .

No forecast anticipated that the , the main route for Middle Eastern oil to reach global markets, would be .

So in March 2026, when the strait closed in the wake of , there was little anyone could do to quickly restore the flow of oil and gas the world’s economy depends on. Some countries did have strategic reserves, but a from those supplies didn’t make a difference for long – and those reserves , paradoxically increasing demand for oil in the future.

Just before that conflict broke out, my fellow researcher, Hiroyasu Sakaguchi at the , and wrote a warning that even in the midst of oversupply, the global buffer for disruption is quite fragile. It was published by the , which promotes energy-security cooperation between the U.S., Japan and South Korea.

As the fighting has continued, oil prices have climbed, and raising prices not only of and , but , consumer goods and .

What an oil forecast is

The reasons today’s demand and supply are so mismatched took shape years earlier, in spreadsheets that most people don’t know about or ignore.

It can take to go from exploring a new oil or gas field to shipping petroleum from it. When companies, banks and governments are deciding what projects to invest in, they look for indicators of how much oil and gas the world will want a decade or more from now.

, and all produce long-range projections of demand and supply. These projections are really sets of “what-if” stories. Forecasters start with how much energy the world uses today, then on topics such as how fast economies will grow, how quickly new technologies like electric cars will be adopted, and how policies like those on pollution and greenhouse gas emissions will change.

Each set of assumptions produces a different answer. When my colleagues and I , the highest projections expected 116.6 million barrels a day would be used; the lowest expected 89.4 million barrels a day. That’s an enormous difference of 27.2 million barrels a day just 10 years out, equal to about one-quarter of all the oil the world uses today.

Forecasts don’t always pan out

Oil forecasts a year or two out tend to be reasonably close to reality and each other, because most of the expected production is already in motion. But much like weather forecasts, the further into the future an oil market forecast looks, the more errors are possible, both with small errors in assumptions and big surprises nobody saw coming.

In the early 2000s, many experts worried the world was running out of . Then, . From 2008 to 2025, U.S. production rose from .

In 2022, the International Energy Agency’s main scenario had . A year later, largely because sales of electric cars were increasing so quickly, the agency .

Then in 2025, the IEA revived a scenario it had shelved – one counting only policies already in force – . That move was a asserting that all the IEA published forecasts did not account for rising demand from artificial intelligence data centers and anticipated accelerating adoption of green technology.

Assumptions rest on hard-to-predict human behavior and frequently don’t work out. The popularity of electric vehicles provides a good example. In Norway, about were fully electric. Yet , because Norwegian buses and trucks still mostly burn diesel. In China, , .

In the United States, sales of fully electric vehicles appear to have peaked, at least temporarily, following the expiration of a federal tax credit in 2025. The share of registered electric vehicles, including hybrid, plug-in and fully electric, . Interest, though, has climbed with pump prices: A majority of U.S. drivers now say , even as the cost of buying one keeps sales down.

Preparing for the wrong problem

Forecasts matter because money follows them. If demand is expected to rise, companies drill new wells, expand refineries, build tankers and construct pipelines. If demand is expected to fall, they hold back, so they don’t end up with more oil than anyone will buy at a profitable price.

For much of the past decade, the most influential forecasts pointed toward slowing demand. Banks grew wary of funding oil and gas projects, especially considering growing commitments to expand the use of renewable energy sources and reduce emissions to tackle climate change. , but funding is just the first step in the multiyear process of bringing more oil to market.

In addition, oil and gas fields produce less as they age. About 90% of recent spending on production went to making up for those declines, . The result was a system built to let supply slide gently down, not to quickly ramp up.

Understandably, no forecast predicted a war, and with so little supply to spare, big disruptions translated into big price jumps.

Why lowering prices takes years

Investments do not provide fast relief. When oil prices crashed in 2014, companies nearly stopped approving new liquefied natural gas plants to chill natural gas into liquid for shipping.

Demand kept growing anyway, especially in China, and – , with about US$65 billion of investment commitments for new projects.

But expansion projects take years to build, so the ones skipped in the lean years simply were not there in the early 2020s. When Russia cut gas to Europe in 2022, there was , and prices hit record highs.

The same delay between investment and production applies now. Money committed in 2026 won’t produce much oil and gas until the 2030s. And investors face a fresh round of guesses about . They also have to guess when the conflict might end, and when and able to resume shipping oil out of the Persian Gulf region.

For people filling their gas tanks and paying their heating bills, these forecasting uncertainties mean prices are likely to stay high and volatile for some time, even when the fighting stops. The energy the world has today was shaped by guesses made years ago – and the energy it will have years from now depends on the guesses being made today.