Global Supply Shock Exposes the Myth of Energy Independence

Published: Mar 19, 2026 10:00 PM • Updated: Mar 21, 2026 4:05 AM • Original source

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The shock halt to oil and LNG supply at the Strait of Hormuz is reverberating to all major energy-consuming regions and exposes the energy security issues of Asia, Europe, and the United States.

No region can be insulated from the biggest disruption in the history of the oil market, though some suffer more than others in terms of supply crunch. But all see soaring fuel prices and a very real threat of accelerating inflation, and no interest rate cuts soon.

Asia experiences the biggest and most imminent disruption, while Europe loses the competition with Asia for LNG supply and remains very much dependent on gas and oil imports. The U.S., while theoretically the most secure in terms of domestic supply, is seeing unprecedented spikes in diesel and gasoline prices as the refining business remains closely linked to global oil prices.

China Buffer amid Supply Shock in Asia

The shock to supply in Asia is massive. This is the region most dependent on LNG and crude oil supply from the Middle East, most of which passes – or at least used to pass – through the Strait of Hormuz.

Asian buyers are racing to cover supply needs with purchases of now-allowed Russian oil on tankers and crude from much further afield, including the United States, West Africa, and Brazil.

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“While SPR releases in Japan, South Korea and potentially more countries in Asia are expected to help refiners overcome the immediate supply shortage—likely for only several weeks from late March into April—this policy band-aid will not be able to address the supply gap over a prolonged period,” Muyu Xu, senior crude oil analyst at Kpler, said earlier this week.

Asian countries have hiked the use of coal for power generation, where possible, to try to limit the loss of 20% of global LNG flows due to the shutdown in Qatar and the de facto closure of the Strait of Hormuz.

Asia is attracting most flexible-destination LNG cargoes away from Europe amid renewed competition for supply.

But prices are so high that many countries in the region are buying only if they have to avoid emergency situations.

Interestingly, China, the world’s top oil and LNG importer, is not as exposed as the massive import figures would suggest. Chinese reliance on Qatari LNG is an estimated 6% of its gas supply mix, while it has built a large crude stocks buffer at low oil prices over the past year.

Still, if this “mother of all disruptions” drags on for more weeks, as it is increasingly looking that way, China would feel the full extent of the shock, too.

Europe Dependent, Once Again

Asia, as the top consuming region, is feeling the physical squeeze, but Europe’s situation may be even more precarious. It not only depends on imports for half of its supply, but it is also a secondary victim of the spike in oil and gas prices, as Asia now commands a premium and attracts the available flexible spot LNG supply.

As a share of imports, Europe is the least secure, according to data from the Energy Institute cited by Reuters columnist Gavin Maguire.

Europe has traded dependence on Russian gas before 2022 with dependence on American LNG after the Ukraine war. It has raised the share of U.S. LNG imports in its gas supply, but now a large part of the more flexible American supply is going to the highest bidder—Asia.

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In view of the already massive disruption to global LNG supply, “both Asian and European markets would need to draw more heavily on existing storage and would increase the need for restocking over the summer,” Massimo Di Odoardo, Vice President, Gas and LNG Research at Wood Mackenzie, said earlier this month.

“This would tighten market conditions well beyond the eventual resumption of trade through the Strait.”

Energy Dominance Doesn’t Shield America from Spiking Fuel Prices

In terms of reliance on foreign supply, the United States appears the least vulnerable as its domestic oil and gas production would, in theory, cover 108% of energy needs, per the data from the Energy Institute.

But while the U.S. is a net petroleum exporter, it still needs to import heavier crude grades because refineries cannot run only on the lighter crudes from the domestic shale fields. Crude imports account for about three-quarters of U.S. total gross petroleum imports, according to data from the Energy Information Administration (EIA).

Nearly 70% of all U.S. refining capacity runs most efficiently with heavier crude. That is why 90% of crude oil imports into the United States are heavier than U.S.-produced shale crude, the American Fuel & Petrochemical Manufacturers (AFPM) trade association says.

Even if the U.S. is the world’s biggest crude oil producer, its refining markets and fuel prices are not an island and depend on the global price of crude, which has surged since the war in Iran started.

As a result, gasoline and diesel prices are soaring.

On Wednesday alone, Americans were set to spend about $350 million more on gasoline than they did on February 28, the day the U.S and Israel began the offensive in Iran. Since February 28, Americans have spent $3.7 billion more on gasoline, according to live GasBuddy gas price data, said Patrick De Haan, head of petroleum analysis at GasBuddy.

GasBuddy also estimates that the jump in diesel prices is record-setting—this week saw the largest 2-, 3-, and 4-week surges in diesel prices ever.

“Prices aren’t at record highs - but the speed of this surge is,” de Haan noted, as the massive supply shock from the Middle East war is ripping through every major market.

By Tsvetana Paraskova for Oilprice.com