Five weeks into the Iran war, the world is facing a severe oil shortage. Benchmark prices hover around US$100 a barrel, but existing supply defenses-including bypass pipelines and tapped strategic reserves-are only a temporary cushion.
A growing shortfall of at least 8 million barrels a day remains. To address this, the market must shift to 'demand destruction.' This involves policymakers using emergency tools to curb energy use, such as lower speed limits, reduced heating and cooling, or mandatory work-from-home orders.
The International Energy Agency has recommended such measures, though major economies fear public backlash. Developing nations like Pakistan, the Philippines, Vietnam, and Thailand are already implementing them.
The impact will be uneven. Soaring prices will initially force demand destruction in poorer nations in Africa, Latin America, and Asia, where factories are closing. If the war lasts months rather than weeks, the crunch will inevitably hit industrialized nations where most oil is consumed.