Conflict-Stricken Oil Regions Leave Global Supply on Shaky Ground

Almost half of the world's oil supply is produced in regions currently engaged in hot conflicts. This raises questions about long-term oil supply security and the limits to diversification.

The Middle East, being the most obvious example, has been severely compromised due to ongoing conflicts. While oil prices on speculative markets have remained capped by trader optimism, the physical supply of oil has been impacted, leading to rationing and emergency releases from storage across the world.

Ukraine's campaign of bombing Russian refineries with drones is also causing fuel shortages that are sending a ripple effect beyond Russia's borders. As the world's second-largest fuel exporter after the United States, Russia's decreased exports have contributed to global refining capacity being down by 10% due to wars in the Middle East and Ukraine.

The effects of this energy crisis are already trickling in. Inflation is rising everywhere, and in the United States, it has contributed to an all-time high debt of $40 trillion. The world's reliance on U.S. crude and refined fuels has increased due to the reduced supply from other regions.