War in Middle East Throws Global Oil Market into Chaos
Oil and gas industry experts were caught off guard by the sudden surge in demand due to the war in the Middle East. In 2023, the International Energy Agency predicted that global oil production would surpass demand by 2028, leading to a surplus of oil. However, this prediction did not account for the Strait of Hormuz being blocked, which drastically reduced global oil supply.
The blockage led to skyrocketing oil prices and fuel shortages in many countries. The lack of investment in new wells and refineries due to low oil prices just a few years prior exacerbated the issue. According to John Patrick Schoeneman Jr., an assistant professor at Oklahoma State University, '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.'
The forecast of slowing demand led banks to become wary of funding oil and gas projects. However, the war in the Middle East changed everything, and investors are now facing a new round of uncertainty about future energy needs.