Senior executives at Shell and Equinor have warned that global energy markets are becoming less able to absorb further supply disruption as inventories, alternative routes and other buffers are depleted by prolonged Middle East instability.
The warning follows months of disruption to oil and liquefied natural gas flows. Markets initially absorbed part of the shock through inventory drawdowns, weaker demand in some Asian markets and changes to shipping and sourcing patterns, but those mechanisms become harder to sustain as disruption persists.
Recent attacks on energy infrastructure and shipping have kept crude prices elevated and increased pressure in refined products, particularly diesel. European energy buyers are also approaching the colder part of the year with gas-storage levels and future LNG availability under greater scrutiny.
Shell chief economist Adam Ritchie and Equinor chief executive Anders Opedal have both pointed to diminishing capacity for markets to manage additional shocks if supply constraints continue. The concern is less about one outage than the cumulative effect of repeated disruption.
For UK businesses, energy volatility reaches well beyond companies buying oil and gas directly. Wholesale costs feed into transport, logistics, chemicals, food manufacturing, construction materials and other energy-intensive activities, often with a delay as supply contracts are repriced.
Diesel is particularly important because commercial transport remains heavily dependent on it. Higher diesel prices affect haulage, distribution, agriculture and construction machinery, creating a broad cost channel into business operations even where electricity prices are comparatively stable.
Natural gas volatility creates a different set of risks. The UK has substantial LNG import infrastructure but competes for cargoes in a global market. Stronger Asian demand can therefore tighten European supply by encouraging flexible shipments to move towards higher-paying markets.
Businesses can manage some of that exposure through hedging, long-term contracts, energy efficiency and diversification of supply. None completely removes the risk created by a sustained physical shortage or exceptionally high wholesale prices.
The current episode also demonstrates the limits of resilience measures introduced after Europe’s earlier energy crisis. Countries expanded LNG capacity and diversified suppliers, improving flexibility, but alternative infrastructure does not create unlimited additional gas or oil.
A sufficiently large disruption can therefore shift competition from one supply route to another. Additional LNG terminals help if cargoes are available; they provide less protection when several regions are bidding for a restricted global supply.
For manufacturers, duration may matter more than a short price spike. Companies can sometimes absorb a temporary increase through inventories, hedging or margins. A prolonged period of high prices influences production, customer contracts and investment decisions, particularly where competitors in other regions have cheaper energy.
Energy producers face a different calculation. Higher commodity prices can lift upstream earnings, but disruption increases logistics, insurance and operating risk while complicating investment and long-term contracting.
The effects also feed into government energy-security decisions. Persistent volatility can strengthen the case for additional storage, diversified imports and domestic generation while influencing the pace at which industrial users invest in efficiency and alternative energy.
Markets have demonstrated considerable ability to reroute cargoes and alter demand when traditional supply paths are disrupted. Shell and Equinor’s warning is that every adaptation uses some of the system’s spare flexibility. If disruption persists into 2027, companies may have to plan around continued energy volatility rather than treating it as a short-lived interruption.
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