Don't be frightened by the $80 oil price; the true energy crisis may still be on its way.

Oil prices surge sharply due to Iran conflict, market nerves tighten, and alarms of an “energy crisis” ring out. But Bloomberg columnist Javier Blas believes these concerns are overstated—at least for now.

On March 6, Javier Blas wrote in Bloomberg Opinion that the current energy market shock is limited in scope, with moderate increases and a short duration, still far from a true energy crisis in history.

The article states that U.S. military strikes on Iran are bad news for the global economy, but he does not believe this shock will trigger the inflation turmoil seen in 2022. Brent crude oil hovers just above $80 per barrel; European natural gas is around €50 per megawatt-hour, nearly doubling in recent days but still far below the 2022 peak of €350 per MWh.

It is worth noting that this shock currently affects only two major commodities: oil and liquefied natural gas. Coal, electricity, and North American natural gas markets remain unaffected. Blas warns that the real risk to watch is in refined oil products—diesel and jet fuel prices have risen much faster than crude oil itself. If the situation worsens and spreads to broader energy categories, a true crisis could form.

What constitutes a real energy crisis: three essential elements

Blas immediately sets a framework for analyzing “energy crisis.” He believes that determining whether an energy crisis exists requires considering three core factors: the types of affected commodities, the magnitude of price increases, and the duration of the rise. Additionally, the starting price levels and supply-demand fundamentals should be taken into account.

Meanwhile, Blas emphasizes that historical context is equally important. The article notes,

During the 1973-1974 oil crisis, oil was nearly the sole energy source, accounting for close to 25% of global electricity generation; today, that share has fallen to less than 3%.

For ordinary European households, electricity and natural gas are as important as—or even more than—oil; for service-sector businesses, oil prices are almost irrelevant, with electricity being the key.

Blas points out that the 2021-2022 period was a true crisis because four major energy forms—oil, natural gas, coal, and electricity—rose sharply in tandem, with high prices persisting for several quarters.

“Many are still analyzing energy markets with paradigms from another era,” he writes.

Horizontal comparison: current data far from crisis threshold

The article states that, compared to historical crisis periods, Blas concludes: “Current energy market performance is quite good.”

Currently, Brent crude is just above $80 per barrel. After the Russia-Ukraine conflict erupted, prices briefly soared above $130. European natural gas is around €50 per MWh, compared to the 2022 peak of €350.

Germany’s wholesale power futures for one year are at €88 per MWh, 91% below the record high of €985, and lower than recent weeks.

In coal, the benchmark price in Asia is about $130 per ton, having hit $440 in 2022. U.S. Henry Hub natural gas futures are below $3 per million British thermal units, compared to $14 at the peak of the 2008 commodities supercycle.

Blas emphasizes that the current impact of the Iran situation is limited to oil and LNG, with no spillover into electricity or coal markets, nor affecting the relatively independent U.S. and Canadian natural gas markets.

Additionally, the market starting point before the conflict was quite favorable—oil prices were low, and both oil and LNG markets faced oversupply this year. Some previously unsold Iranian and Russian crude is finding buyers, providing some buffer. For Europe, the timing is also advantageous: hydropower reservoirs are well-stocked, and spring will bring significant solar power contributions.

Despite no immediate concern over crude oil prices, Blas highlights a sector to watch closely: refined oil products.

He explains that only refiners directly buy crude oil and bear its price fluctuations; consumers and businesses in the real economy buy gasoline, diesel, and jet fuel—these are the variables that truly impact economic activity. Currently, diesel and jet fuel prices are rising much faster than crude oil itself.

“If an energy crisis truly occurs, it will originate from these refined products,” Blas writes.

Worst-case scenario: low probability but not to be ignored

However, Blas does not shy away from extreme risk scenarios. He admits that his worst-case impact forecast of the Gulf conflict is more pessimistic than most analysts.

He describes a “possible but unlikely” nightmare scenario: The U.S. underestimates Iran’s resistance, the Strait of Hormuz is blocked for three months; Iran, seeking survival, bombs key oil facilities in Saudi Arabia, Kuwait, and the UAE; these countries retaliate, destroying Iran’s oil industry.

In this scenario, global daily supply could drop by up to 20 million barrels for a quarter, then another 10 million barrels over the following year. “If anyone thinks oil prices would stop at $100 in such a scenario, I have a oil field to sell you,” he writes.

At the same time, Blas notes that real energy crises in history are rarely caused by a single event; they are usually the result of multiple factors stacking up.

During the 1973 crisis, U.S. oil production was at its peak, and global demand was out of control; the 2022 crisis involved a combination of low French nuclear output, drought-induced hydropower shortages, panic buying by German authorities, and utility hedging failures. Currently, these overlapping factors have not materialized; in fact, some offsetting effects are present.

In conclusion, Blas ends with a simple remark: “Extend the timeline of price charts. Looking back over the past decade, this week’s volatility doesn’t seem as frightening as it first appeared.”

Risk warning and disclaimer

Market risks are present; invest cautiously. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions herein are suitable for their particular circumstances. Invest at your own risk.