IEA's recommendations on how to brace for incoming global energy crisis

The International Energy Agency has warned that supply-side measures alone will not be sufficient to address what it describes as “the largest supply disruption in the history of the global oil market,” as energy markets continue to be shaken by escalating tensions in the Middle East.

In recommendations issued on March 20, the Paris-based agency urged governments and consumers to focus more on reducing demand, arguing that this could provide faster and more effective relief than waiting for disrupted oil production to recover.

Instead of relying solely on increased supply, the agency outlined practical steps to curb consumption, including reducing road and air travel, encouraging remote work, and switching to alternative energy sources for household use.

“Addressing demand is a critical and immediate tool to reduce pressure [on] consumers by improving affordability and supporting energy security,” the IAE said in its statement, as it laid out a range of measures that can be taken by households and businesses to lower demand.

The recommendations place particular emphasis on transport, which accounts for roughly 45% of global oil consumption. Measures such as working from home, increasing carpooling, using public transportation, and reducing non-essential flights were highlighted as among the most effective ways to cut fuel demand.

Additional steps include lowering speed limits to improve fuel efficiency, limiting private vehicle use in urban areas, and redirecting liquefied petroleum gas (LPG) away from transport and toward essential uses such as cooking. The agency also pointed to cleaner cooking alternatives as a way to reduce reliance on LPG and stabilize prices.

Alongside demand-side actions, governments are exploring fiscal policies to shield consumers from rising energy costs and prevent further inflationary pressure. Spain is reportedly planning to cut value-added tax on fuel from 21% to 10% and remove a 5% electricity tax. Italy has already reduced excise duties on fuel, while Germany is considering measures such as a windfall tax on oil companies to offset consumer costs.

The warning comes as geopolitical tensions continue to disrupt global energy markets. Oil prices have surged more than 40% since the outbreak of the US-Iran war on February 28, reaching levels not seen since 2022. A key factor behind the spike has been the effective closure of the Strait of Hormuz, a critical chokepoint through which a significant portion of the world’s oil supply typically flows.

The disruption has not only driven up crude prices but also increased the cost of refined products such as diesel and jet fuel, adding pressure on transportation, logistics, and consumer prices globally.

The agency stressed that coordinated efforts to reduce consumption could play a decisive role in stabilizing markets and easing the burden on households, particularly as uncertainty over supply conditions persists.

By Nazrin Sadigova