The latest oil shock is not only about supply. It is also about confidence. In the clearest sign yet that demand destruction may outlast the immediate crisis, International Energy Agency executive director Fatih Birol says the upheaval triggered by the Iran war has altered how governments and markets think about fossil fuels. His warning is stark: the damage is already done, and the consequences may echo through energy policy, investment decisions, and fuel demand for years.
Why the shock matters now
Birol, who leads the world’s most influential energy watchdog, said countries are beginning to lose trust in fossil fuels as a secure energy base. That shift matters because energy security, not just climate policy, is now reshaping decision-making. In his view, governments will review their energy strategies, renewables will get a significant boost, nuclear power may gain fresh momentum, and the shift toward a more electrified future will accelerate. All of that, he said, will cut into the main markets for oil.
The timing is important. The crisis has already created pressure across sectors that depend on energy inputs, and Birol said the effects will continue even if the Strait of Hormuz reopens. He singled out fertiliser, food, helium and software among the industries still facing spillovers. That breadth helps explain why demand destruction is not a narrow market term here; it is a political and industrial response to perceived risk.
Demand destruction and the new energy calculus
Birol’s central argument is that this is not a temporary price spike that can be waited out. He said the global energy picture has changed for ever, with permanent consequences for oil markets over the coming years. The phrase “the vase is broken” captures the scale of the rupture: once buyers and governments doubt reliability, the search for alternatives becomes structural rather than cyclical.
That is why demand destruction may be more significant than short-term supply disruptions. If governments move faster into renewables and nuclear power, and if electrification gathers pace, oil loses some of its long-term market power even without an immediate collapse in consumption. Birol also warned that sustained fossil-fuel prices could tempt developing countries toward coal, even as solar remains competitive with coal on cost and continues to grow faster.
In other words, the crisis is pushing energy systems in two directions at once: away from oil and toward cleaner sources, but also, in some countries, back toward coal if affordability becomes the dominant concern. That tension is central to understanding why demand destruction is both a market event and a policy test.
What Birol says about the UK and North Sea expansion
Birol also used the interview to weigh in on the UK’s North Sea debate. He said the government could make its own choice, but argued that expanded production from the Jackdaw and Rosebank fields would not materially improve the UK’s energy security or change the price of oil and gas. He added that new exploration licences would not deliver significant quantities of oil and gas for many years and would not lower bills.
His assessment was not framed as a climate argument alone. He said that even from a business point of view, major new exploration might not make sense because the UK would remain a significant importer and price taker on international markets. Tiebacks, which extend the range of existing oilfields, were treated differently: Birol said those should go ahead.
That distinction is revealing. It suggests a policy line between incremental domestic extraction and new large-scale bets on future fossil-fuel supply. In a market shaped by demand destruction, the strategic value of long-lead oil projects becomes harder to justify.
Expert perspective and global ripple effects
Birol also argued that the crisis is too early for new windfall levies, even though he had supported such taxes during the Ukraine crisis to skim excess profits from energy companies. That restraint indicates how unsettled the current moment remains: governments are still assessing whether the primary response should be taxation, investment, or a wholesale redesign of energy security planning.
The wider implication is that demand destruction is now tied to trust. If governments believe fossil fuels can no longer guarantee stability, they may accelerate the very investments that reduce future oil demand. For renewables, Birol called them a no-regrets option and said he had never heard anyone regret building them. For nuclear power, he expects further growth as part of the same security-driven shift.
The broader global question is whether this crisis becomes a turning point that hardens policy against fossil-fuel dependence, or whether high prices and insecurity ultimately revive old habits. If the damage is done, as Birol says, then how much of the world’s energy future has already been rewritten?
