The oil crisis triggered by the Iran war has changed the fossil fuel industry for ever, the head of the International Energy Agency said on Monday, warning that countries would lose trust in oil and gas and that demand would weaken for years. Fatih Birol said the shock had already set off a shift that could not be reversed.
“The vase is broken, the damage is done – it will be very difficult to put the pieces back together,” Birol said, arguing that the crisis would force governments to rethink energy security and accelerate demand destruction in the world’s main oil markets. He said the result would be a significant boost to renewables and nuclear power, along with a further move toward electrification.
Birol said the change would not stop at the pumps. As fossil fuel buyers reassess supply risks, he said the “perception of risk and reliability” would change and governments would review their energy strategies. In his view, the disruption was already large enough to alter the direction of global energy policy, with solar increasingly competitive with coal on cost and renewables offering a choice with no regrets. “I never heard that anybody ever regretted” building renewables, he said.
His remarks come as oil industry allies push for more drilling in the UK North Sea, including the Jackdaw and Rosebank fields. Birol dismissed the idea that those projects would materially change Britain’s energy position, saying they would not affect prices, would not bring meaningful volumes for many years, and would leave the UK a significant importer and price taker on international markets. “They will not lower the bills,” he said.
That leaves a harder question for policymakers than whether to drill more. Birol said it was too early in the crisis for new windfall taxes, but he also said the wider fallout was already spreading beyond energy, with impacts on fertiliser, food, helium, software and other industries likely to continue even if the strait of Hormuz reopened. He said the crisis was “bigger than all the biggest crises combined, and therefore huge,” and that there was “no going back” from the damage it had done.
For the UK, that means the argument over North Sea licences is unlikely to change the underlying arithmetic. For the global market, Birol’s warning is starker still: the shock from the Iran war has not just tightened supply, it has started to destroy demand, and the effects will outlast the fighting.
