Oil and Gas Industry Expected Surplus – But War Brought Shortage Instead

September 29, 2026

The article examines how the 2026 closure of the Strait of Hormuz, following U.S. and Israeli military actions against Iran, created a severe global oil crisis that existing forecasts failed to anticipate. Energy companies had underinvested in new production capacity based on projections of declining oil demand driven by electric vehicle adoption and renewable energy growth, leaving minimal supply buffers when the disruption occurred. The mismatch between supply and demand stems from the long lead times required for oil projects—roughly 20 years from exploration to production—and the high uncertainty in forecasting factors like technology adoption, economic growth, and policy changes.

Who is affected

Global consumers paying higher prices for gasoline, diesel, heating fuel, fertilizer, food, and consumer goods
Oil and gas companies that underinvested in new production capacity
Banks that reduced funding for petroleum projects
Countries relying on Middle Eastern oil through the Strait of Hormuz
U.S., Japanese, and South Korean governments (members of the Trilateral Energy Security Committee)
Government research agencies, oil-producing countries, and forecasters
The International Energy Agency
U.S. drivers considering electric vehicles due to high gas prices

What action is being taken

Countries are releasing strategic oil reserves in a massive coordinated effort (though this hasn't made a long-term difference)
The conflict between the U.S., Israel, and Iran is continuing
Oil prices are climbing
Money is being committed to new oil and gas projects in 2026 (though these won't produce results until the 2030s)

Why it matters

This situation demonstrates the critical vulnerability of global energy systems when long-term forecasting errors combine with geopolitical disruptions. The 20-year lag between investment decisions and oil production means that today's energy availability reflects assumptions made decades ago, while current decisions will shape energy security far into the future. When forecasts predicted declining demand, companies reduced investments in new capacity, but the actual closure of the Strait of Hormuz revealed there was insufficient buffer supply to handle major disruptions. This mismatch has cascading economic effects beyond fuel costs, impacting food, fertilizer, and virtually all consumer goods, while also creating a paradox where depleted strategic reserves will need replenishing, further increasing future oil demand.

What's next

Wells, refineries, and shipping locations will need to be repaired when the conflict ends to resume Persian Gulf oil shipments
Strategic oil reserves may need to be replenished, paradoxically increasing future oil demand
Oil and gas projects receiving investment commitments in 2026 won't produce significant supplies until the 2030s
Prices are likely to remain high and volatile for some time, even after fighting stops

Read full article from source: The San Diego Voice & Viewpoint