In the past decade, we have seen a rapid succession global energy crises, fueled by conflict, extreme weather and supply chain snarls. The highly fragmented oil and gas market of today is becoming more interconnected, and as the transition to a low-carbon economy accelerates, repeated shocks could become 'the norm.

The first was the inflationary spike that followed the pandemic in 2021. This was quickly followed by Russia's invasion in Ukraine in 2022, which amplified this. Four years later comes the Iran War, which has caused the biggest disruption in oil and gas supply history. Three'shocks' of this magnitude in a very short time span are far beyond the norm. Since World War II, there has been an average of one major energy crisis every decade.

The underlying causes for the recent crises, geopolitical fragmentation and trade fragmentation, suggest that the world could face more shocks in decades to come.

SYSTEM OF TRADING FRACTURED

The energy markets of today are more globalised that ever. This is due to a shift of the energy demand centre in recent years away from Western economies, and towards Asia, especially China.

According to the Energy Institute Statistical Review, global oil imports increased by 55% from 2000 to 2024 to 70 million barrels of oil per day. China's oil imports grew six times over the period, to 13,4 million barrels per day. The transformation of the U.S. has also dramatically altered global energy flows. The United States, the No.1 oil consumer in the world, has transformed from one of its biggest energy importers into a top producer and exporter of oil and gas. From being one of the world's largest energy importers to becoming its top oil and natural gas producer and exporter, Saudi Arabia has become the world's No.

U.S. oil imports increased more than 12 times between 2000 and 2026 to approximately 12 million bpd, or 11% of the global market. This puts Washington in direct competition against traditional exporting powers such as the Organization of the Petroleum Exporting Countries (OPEC) and Russia. The U.S.'s booming exports of LNG (liquefied natural gases) have also contributed to this globalisation, improving efficiency, stimulating growth, and strengthening the ties between importers and producers.

All of this worked for a while.

The war in Ukraine revealed both the strengths and weaknesses of this model. After the invasion of Russia and subsequent Western sanctions, Europe was left in a state of confusion due to its dependence on Russian energy. Europe was forced to reassess its energy security and diversification. The Iran War has also shattered another long-held?assumption, that Gulf producers wouldn't engage in conflict which would seriously hinder energy flows. Tehran's decision, to attack the energy infrastructure of its Gulf neighbours and block the Strait of Hormuz (through which previously 20% of world oil and gas flowed), has shattered decades of tacit restraint by Middle Eastern producers. This "new norm" could be the seed for future tensions in the region. The ease with which Iran has disrupted world energy supplies raises concerns about the security at other key chokepoints, from the Red Sea down to the South China Sea.

TRADE UNDER STRANGE

Trade conflicts have risen in number alongside the increase in military conflicts and undermined the efforts of post-war multilateralism to promote peace.

The tensions were heightened by President Donald Trump's decision to impose tariffs on the majority of trading partners last year. His use of America's dominance in energy as a negotiation tool increased concerns about the U.S.'s long-term reliability as a provider, and reinforced calls elsewhere for greater self-sufficiency. China's growth as an economic and industrial powerhouse has weakened the previous trading order, and created a two-tier market for oil and gas. Beijing has been openly violating Western sanctions, which have grown in the last decade. It imports large quantities of oil and natural gas from Russia and Venezuela. The Chinese government has also helped to accelerate the development of alternative payment, shipping, and insurance networks, which fragment global markets.

ENERGY TRANSITION, NEW RISKS

There is also the energy transformation. After a record-breaking surge in solar installations last year, renewable power accounts for almost half of the global electricity generation capacity. This shift will likely accelerate in the wake of recent crises, as reducing dependence on fossil-fuels is increasingly overlapping with government efforts to boost energy security. The European Union made this point explicit?in a program aimed at protecting consumers from volatile oil and gas prices.

"We need to accelerate the transition to clean, domestic energy sources." The plan will provide us with energy security and independence, as well as a better ability to weather geopolitical crises.

The transition brings with it new vulnerabilities. The reduced reliance on fossil fuels may lead to a heavy reliance on low-carbon technologies, from solar panels and battery storage, which are largely concentrated in China. This dependency is already emerging and is a major source of tension between Beijing and Western governments in terms of trade and industry.

A slowing in demand will also intensify the competition amongst major producers, including Gulf States, Russia and U.S. Energy could become a more powerful geopolitical tool.

Even if energy transition slows down?climate changes, it will not reverse them. The rising global temperatures, and the increasing frequency of extreme weather events - such as hurricanes, droughts, and heatwaves -- are already disrupting power grids, energy production and transportation. The future is not a happy one. The global energy market will be characterized by volatility, not stability. To be able to withstand future shocks the countries will have to build energy systems which are flexible, diversified and most likely domestic.

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(source: Reuters)