Analysis: Why the world’s largest-ever oil supply disruption hasn’t resulted in catastrophe; 2022 price spike remains intact

As the U.S. and Iran near a peace agreement, energy analysts note the world’s largest oil supply disruption failed to shatter previous records, including $5 per gallon average gas costs in the U.S. in 2022. 

The conflict in the Middle East and Iran’s months-long effective closure of the vital trade chokepoint known as the Strait of Hormuz resulted in the largest global oil supply disruption in history, the head of the International Energy Agency (IEA) said in April. Prices jumped in response to the conflict and the strait’s closure; however, the cost of oil, natural gas and coal never eclipsed previous peaks.

Though U.S. gas prices spiked significantly from the conflict’s disruptions, they remain below the 2022 record high of just over $5 per gallon, which took place under President Joe Biden’s administration. 

Javier Blas, a Bloomberg energy columnist and oil markets expert, called the outcome “remarkable,” noting the world’s largest oil supply disruption “failed to create a major energy crisis.”

Several analysts and authoritative energy institutions warned of a severe global energy crisis, with the IEA even recommending workers stay home to limit fuel usage.

“The world has never experienced a disruption to energy supply of such magnitude,” Fatih Birol, head of the IEA, said April 7. Birol said the oil and gas crisis was “more serious than the ones in 1973, 1979 and 2022 together.”

The U.S. and Iran are set to sign a memorandum of understanding on Friday in Switzerland. President Donald Trump said Sunday on Truth Social that he would direct the U.S. naval blockade to leave the strait, though most ships are still not traversing the region after Tehran effectively blocked it in February, according to multiple reports.

Even after traffic resumes through the strait, it will take several months for energy costs to adjust following the supply chain disruption, according to energy analysts.

“Market cushions were bigger than anyone believed – there was more oil stored on the water, more oil in underground and surface storage around the world and countries were able to adjust faster to a constrained supply situation than anticipated by most experts,” David Blackmon, an energy and policy writer who spent 40 years in the oil and gas business, told The Lion.

Blackmon listed several reasons why the dire energy crisis predictions have thus far proved incorrect, including that countries adjusted to constrained supply faster than anticipated and more oil made it through the strait than assumed.

Blackmon added “IEA even underestimated the fast impact” of its coordinated strategic reserve program. Thirty-two IEA member countries agreed March 11 to make 400 million barrels of oil from their reserves available to the market.

Blackmon also noted Trump’s numerous posts claiming a deal was nearing frequently came late on Friday afternoons and “had the effect of calming the oil and financial markets going into the weekends.” He added the caveat that “obviously, we aren’t out of these woods yet. The announced agreement is a fragile, tentative deal … [but] for now, no ‘major energy crisis’ has resulted from this 3½-month conflict.”

Venezuela swiftly ramped up oil exports, “thanks largely to U.S. influence,” Blackmon said. China quickly cut its import needs by “hoarding its own refined products and domestic production,” he said, and noted Saudi Arabia also quickly filled its pipeline to bypass the strait.

Additionally, CNN reported on June 9 that JPMorgan wrote in a client note that tankers may be carrying so-called “clandestine flows” through the strait.

The nation also increased its oil exports, becoming the world’s largest oil exporter as it drew from the Strategic Petroleum Reserve (SPR). The SPR is now at its lowest level since 1983, according to federal data released Monday.

The U.S. Department of Energy announced March 11 that it would release 172 million barrels of oil from the reserve to help tame markets as part of the broader IEA program. Energy companies must return the oil with interest in tranches to the SPR from November 2026 through September 2028, Reuters reported March 18.

Some energy policy experts such as Diana Furchtgott-Roth, a distinguished fellow at the Energy Policy Research Foundation, have argued the SPR may not be necessary anymore.

“The biggest SPR we have is right under our feet,” Furchtgott-Roth told the Daily Caller News Foundation in January. “The SPR was conceived of when the United States had very little oil production. … Times have changed.”