The global energy shortage and skyrocketing oil prices that have upended economies worldwide in 2026 did not emerge overnight. Their roots stretch back years, to flawed long-term energy forecasts and an unforeseen geopolitical shock that exposed the extreme fragility of the world’s oil supply system.\n\nIn 2023, the International Energy Agency (IEA) projected that global oil supply would outpace consumer demand by 2028. This and similar projections of slowing demand pushed oil prices down to levels too low to justify new investment in drilling projects and refinery expansions. No forecaster, however, predicted that the Strait of Hormuz – the critical chokepoint that carries most Middle Eastern oil to global markets – would be almost entirely shut down by geopolitical conflict.\n\nThat shock came in March 2026, when the strait closed following US and Israeli military strikes on Iran. With years of underinvestment in new production capacity, there was no quick way to restart the flow of oil and gas that the global economy relies on. While major energy-consuming nations coordinated a massive release of strategic petroleum reserves, this intervention only temporarily cooled prices. Worse, the drawdown of reserves will eventually require replenishment, creating an unexpected increase in future oil demand that will put further upward pressure on markets.\n\nMonths before the conflict erupted, author John Patrick Schoeneman Jr. and Hiroyasu Sakaguchi of the Institute of Energy Economics, Japan, published a report through the Trilateral Energy Security Committee – a body fostering energy security cooperation between the US, Japan, and South Korea – warning that even amid apparent oversupply, the global buffer against energy disruptions was alarmingly fragile. That warning has proven prescient: as fighting has continued, crude prices have surged, triggering widespread fuel shortages and pushing up costs for nearly every sector of the global economy, from gasoline and diesel to fertilizer, food, and all consumer goods.\n\nTo understand how this crisis unfolded, it is first necessary to understand how long-term oil forecasting works. Bringing a new oil or gas field online from initial exploration to commercial production can take roughly 20 years. When energy companies, lenders, and governments evaluate whether to fund new projects, they depend heavily on long-term projections of future oil and gas demand. These projections are built from a series of assumptions about economic growth rates, adoption of new energy technologies like electric vehicles, and future policy changes around pollution and greenhouse gas emissions. Each set of assumptions produces vastly different demand projections: when Schoeneman and his colleagues compared leading 2025 forecasts for 2035 global oil demand, the highest projection stood at 116.6 million barrels per day, while the lowest was just 89.4 million barrels per day – a gap of 27.2 million barrels per day, equal to roughly one-quarter of current global oil consumption.\n\nJust as with weather forecasting, the accuracy of oil market projections degrades sharply the further out they extend. Short-term forecasts for one or two years out tend to be relatively accurate, since most planned production is already underway, but long-term projections are vulnerable to both small errors in baseline assumptions and entirely unforeseen black swan events.\n\nHistory is full of examples of these forecasting misses: in the early 2000s, most analysts warned the world was running out of cheap, easily accessible oil. That narrative was upended when new drilling and hydraulic fracturing technology unlocked massive volumes of shale oil, pushing US oil production from 5 million barrels per day in 2008 to 13.6 million barrels per day by 2025. More recently, the IEA has repeatedly shifted its projection for when global oil demand will peak: in 2022, it forecast a peak in the mid-2030s; by 2023, rapid growth in electric vehicle sales pushed that peak to before 2030; and in 2025, amid pressure from the US government and other stakeholders who argued existing forecasts failed to account for growing energy demand from AI data centers and green technology supply chains, the IEA revived a previously shelved scenario that projects oil demand will keep rising until at least 2050.\n\nMany forecasting assumptions rely on predictions of consumer behavior that often fail to materialize. Electric vehicle adoption offers a clear case in point: in Norway, nine out of 10 new cars sold in 2024 were fully electric, yet road fuel consumption only fell by roughly 10% because most heavy-duty buses and trucks still run on diesel. In China, more than half of new cars sold in 2024 were electric, but national gasoline consumption remains higher than it was before 2020. In the US, fully electric vehicle sales appear to have hit a temporary peak after the expiration of a federal tax credit in 2025, and even with plug-in and hybrid models included, EVs still make up less than 10% of registered passenger vehicles. While high pump prices have made most American drivers more open to buying an electric vehicle, high upfront purchase costs continue to suppress actual sales.\n\nThese forecasting errors have real-world consequences, because global energy investment follows long-term demand projections. If forecasters predict falling demand, companies hold back on new drilling, refinery expansion, and infrastructure investment to avoid being left with unprofitable excess supply. For much of the past decade, leading forecasts consistently pointed to slowing future oil demand, and growing commitments to renewable energy expansion and emissions reductions made banks increasingly wary of funding new fossil fuel projects. While banks have recently become more willing to back petroleum projects, new production takes years to bring online – and most current production spending is going only to offset declining output from aging fields, not to expand total supply beyond current levels.\n\nThe result was a global energy system structured for gradual supply decline, not for a sudden major disruption. When the Strait of Hormuz closed, there was almost no excess capacity to draw on, turning a regional geopolitical shock into a global energy crisis with runaway price growth.\n\nThis pattern of delayed market adjustment is not without precedent. When oil prices crashed in 2014, energy companies all but halted approvals for new liquefied natural gas (LNG) export facilities. Global LNG demand continued to grow, particularly in China, and investment surged to a record high in 2019, with $65 billion in new project commitments. But because LNG facilities take years to construct, the skipped projects from the 2014–2018 price slump left the global system with no spare capacity when Russia cut natural gas exports to Europe in 2022, leading to record European gas prices.\n\nThe same dynamic is playing out today in global oil markets. New investment committed in 2026 will not deliver substantial new production until the 2030s. Investors currently face a new set of uncertain guesses: how quickly will renewable energy capacity expand amid high oil prices? When will the Middle East conflict end, and how long will it take to repair damaged infrastructure and resume normal oil exports from the Persian Gulf?\n\nFor consumers facing higher fuel costs and inflated prices for nearly all goods and services, this means energy prices will likely remain high and volatile for years to come – even after the conflict in the Middle East ends. The energy supply the world has today was shaped by forecasting decisions made decades ago, and the energy security of future decades will be determined by the assumptions and choices being made by companies and governments right now.