Energy Crisis: The Impact of Global Conflict on Oil Prices

The current global energy crisis has had a significant impact on oil prices. Conflicts such as tensions between major oil producing countries, including OPEC and non-OPEC, have a major influence on the supply and demand for oil in the international market. When conflict increases political uncertainty, oil producers often reduce production, leading to price spikes. The first factor that triggered the energy crisis was increasing geopolitical tensions. Conflicts such as war in the Middle East or sanctions against oil-producing countries such as Russia could disrupt global oil supply chains. This situation panicked investors, causing a rapid spike in oil prices. For example, sanctions against Russia following its invasion of Ukraine in 2022 saw world oil supplies drastically reduced, causing oil prices to skyrocket to their highest level in a decade. Second, global demand for oil also fluctuates, impacting prices. As the post-COVID-19 pandemic economic recovery begins, oil demand is increasing again. As markets open and restrictions are relaxed, people’s mobility increases, causing fuel demand to rise. However, as political tensions rise, this uncertainty causes adjustments in oil consumption, potentially reducing demand in countries directly affected by the conflict. Furthermore, government intervention also plays an important role. Oil producing countries often change production policies to stabilize prices. In a crisis situation, OPEC+ may decide to reduce production to support prices. Conversely, large countries such as the United States can increase shale oil production to offset shortfalls from international markets. Oil prices are also affected by currency exchange rate fluctuations. Especially USD, as the main currency for global oil trading. If the dollar strengthens, oil prices tend to decrease, and vice versa. When global conflict tensions occur, investors look for safe assets, resulting in a push in the dollar exchange rate which has a direct impact on oil prices. Apart from that, the socio-economic impact of the energy crisis is felt in society. Rising oil prices not only affect fuel costs, but also impact inflation and the cost of basic goods. Families and businesses are increasingly stressed by rising transportation and logistics costs, sparking unrest in various parts of the world. Investors and market analysts now see that understanding the factors that influence oil prices is very important. Monitoring global conflict developments, oil-producing countries’ policies, and market dynamics can provide better insight into the future direction of oil prices. The price fluctuations that occur are a reflection of the complexity of the global market which is influenced by many external and internal factors. With all these dynamics, the current energy crisis is a valuable lesson about the world’s dependence on energy, especially oil. The strategy of diversifying energy sources and developing renewable energy is becoming increasingly relevant for countries to reduce dependence on energy sources that are vulnerable to conflict. Energy independence is a strategic goal that must be achieved to face future uncertainty related to the global energy crisis.