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Just weeks ago, global oil markets were awash in supply, keeping prices subdued and steady. Now, conditions have shifted dramatically, with segments of the energy sector behaving as though supplies are nearing critical levels.

The sudden change stems from escalating conflict in the Middle East, which has triggered what analysts describe as the largest oil supply disruption on record. An estimated 12 million to 15 million barrels per day have been knocked offline.

Such a massive shortfall is widely seen as unsustainable. Strategic reserve releases and pledged output increases from OPEC+ have proven insufficient to offset the losses.

As a result, alarm signals are emerging across markets over whether enough physical supply exists to meet global demand and sustain economic activity.

“The longer this goes on, the scarier it is. Today we might not have a shortfall, but eventually we will,” said Andy Lipow, president of Lipow Oil Associates.

“If we continue on the path we are on now, we will run out of fuel,” he warned.

Market Behavior Raises Red Flags

Both futures trading and physical oil transactions are reflecting mounting concern.

Near-term delivery contracts are commanding significantly higher prices than those for later dates, a condition known as backwardation. This pricing pattern typically indicates fears of tightening supply, especially over longer horizons.

Supply constraints have played a central role in pushing U.S. oil futures to nearly double since the start of the year, despite it being only April. Meanwhile, Brent crude, the global benchmark, has surged past $110 per barrel.

Even more striking is the rapid rise in prices for actual physical oil. “Dated” Brent — which tracks real-world cargoes — climbed to $141.26 last week, marking its highest level since 2008.

“It’s like the last bottle of water: You’re willing to pay anything for it,” said Vikas Dwivedi, global energy strategist at Macquarie Group. “Valuing physical oil during a supply shock is more art than science.”

Further underscoring the strain, Saudi Arabia — the world’s largest oil exporter — is reportedly imposing record premiums on its crude.

According to the Financial Times, Saudi Arabia is seeking a $19.50 premium for shipments to Asia relative to Arab Light benchmarks, and as much as $30 above Brent for European buyers.

Consumers are already feeling the impact. Lipow estimates Americans are spending about $830 million more each day on gasoline, jet fuel and other transportation fuels compared with pre-war levels.

Jet Fuel Surge Forces Airline Adjustments

While crude oil prices dominate headlines, shortages of refined products such as jet fuel, diesel and gasoline may pose a more immediate threat to economic stability.

Jet fuel costs have doubled in the past month, driven by reduced crude availability. Airports typically maintain only a few days’ supply, and airlines have largely abandoned fuel stockpiling and hedging practices in recent years.

Lipow said he’s “very concerned about jet fuel.” However, he noted that airlines would begin cutting flights long before supplies are completely depleted.

That process has already begun. Some carriers are trimming schedules, including United Airlines, which plans to reduce capacity by 5% over the next six months, affecting the peak summer travel season.

Airlines are also increasing fares and reinstating unpopular baggage fees. In Europe, some Italian airports have introduced fuel restrictions, according to Bloomberg.

Export Limits and Rationing Emerge

If the conflict persists and the Strait of Hormuz remains closed for another six to eight weeks, Dwivedi warned that diesel shortages could materialize. Gasoline shortages could follow if disruptions extend into the summer driving season.

Unlike crude oil, which can be rerouted through alternative shipping channels, refined fuels are typically transported via pipelines, limiting flexibility.

In the United States, the East Coast and West Coast are particularly exposed due to their reliance on imported fuel.

“The West Coast market could go apeshit in a moment’s time,” said Tom Kloza, an independent oil analyst who works as an adviser for Gulf Oil.

Globally, governments are already taking steps to manage the imbalance between supply and demand.

On the supply side, countries including China, Thailand, Pakistan and South Korea have imposed export restrictions, while Russia has halted gasoline exports amid its war with Ukraine.

To curb demand, nations such as Myanmar and Bangladesh have begun rationing fuel — a move that risks slowing economic growth.

Although the United States remains more insulated than many countries due to its status as the world’s top oil producer and a major refining hub, it is not immune to global supply pressures.

“It’s like there is one great gaping hole in the hull of a ship,” said Kloza. “The problem starts in Asia, then Africa and Europe. And at some point, it will catch up to us in the United States.”