The International Energy Agency (IEA) stated that the closure of the Strait of Hormuz has caused the largest disruption in the history of global oil markets. Global supply is projected to plummet by approximately 8 million barrels per day (bpd) in March—roughly 8% of the world's supply.
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In response, IEA member states have approved a proposal to release a record 400 million barrels from strategic reserves to stabilize prices and compensate for the loss of Middle Eastern production.
Below is a historical overview of previous major oil supply disruptions:
1. The Arab Oil Embargo (1973–1974)
The October 1973 War, sparked by coordinated Egyptian and Syrian attacks on Israel, triggered the Arab oil embargo. Arab producers, via the Organization of Arab Petroleum Exporting Countries (OAPEC), ordered an immediate 5% production cut, followed by additional monthly 5% reductions.
Objective: To pressure Western nations to force an Israeli withdrawal from Arab territories occupied since 1967.
Impact: Declassified U.S. National Security Council documents estimated the embargo caused a U.S. supply shortage of 2–3 million bpd, with total global shortages reaching 4.5 million bpd.
Results: Crude prices nearly quadrupled, jumping from $2.90 to $11.65 per barrel by January 1974. This crisis led to the establishment of the IEA in 1974 to coordinate global energy responses.
2. The Iranian Revolution (1978–1979)
Political upheaval in Iran led to the collapse of Shah Mohammad Reza Pahlavi's government. By January 1979, Iranian oil production dropped sharply by 4.8 million bpd (approx. 7% of global supply).
Impact: Prices more than doubled between April 1979 and April 1980, driven by speculation and strong global demand.
Economic Consequences: The shock contributed to high inflation in the U.S. In response, Fed Chair Paul Volcker adopted aggressive monetary tightening. While this eventually broke the cycle of stagflation, it pushed the U.S. economy into a severe recession.
3. Hurricanes Katrina and Rita (2005)
Hurricane Katrina struck the U.S. Gulf Coast in August 2005, paralyzing offshore production. At the peak of the disruption on August 29, nearly 1.38 million bpd were offline. This was followed by Hurricane Rita in September, bringing total combined losses to 1.53 million bpd.
Response: The U.S. Department of Energy loaned 9.1 million barrels from the Strategic Petroleum Reserve (SPR). The U.S. and IEA also conducted a coordinated release of 30 million barrels.
Regulatory Action: Emergency waivers were issued to allow for alternative fuel usage and the temporary suspension of the Jones Act to allow foreign vessels to transport fuel between U.S. ports.
4. The War on Ukraine (2022)
Russia’s full-scale invasion of Ukraine in 2022 sparked a global energy crisis as European nations sought to decouple from Russian oil and gas.
Impact: Prices surged by over 50% in weeks, reaching their highest levels since 2008.
Response: President Joe Biden ordered the release of 180 million barrels over six months. Additionally, Western nations implemented a price cap on Russian oil exports to limit war financing without removing its supply from the global market.
Source: AFP
