Oil, why the crisis is more complicated than the 1970s

We need to go back to the forgotten fundamentals and study the energy balances of Italia, Europe and the world to better understand what is happening with the crisis. What is missing from the Strait of Hormuz is above all crude oil, approximately 15 million barrels per day (mbg), plus another 5 mbg of products, to be compared to a global demand of 104 mbg. Oil - better, its derivatives - more than 50 years after the first oil crisis in 1973, and despite enormous efforts to reduce its importance, remains the main source within the global energy balance with a 34% share, followed in second place by coal with 27% and gas with 25%. The remaining 14% is divided between large hydro and other renewables (9%) and nuclear with 5%. In individual countries this structure does not change much and oil remains, more or less, always in first place, with the big exception of China which uses a lot of coal.

In Italia, oil consumed is 52 million tonnes per year, 1 mbg, a volume in recent years aligned with gas, also around 50 million tonnes of oil equivalent (Mtoe) and counts for 35% of our energy demand. This dominance of oil, which has only slightly receded over the years, stems from the fact that in transport, one of the main sectors of final energy consumption, its derivatives seem to have no alternative and count for more than 95% of the total. Mobility is one of the basic needs of any society, even the most primitive, but with modernisation it has exploded. All global transport of people and goods, from Africa to New York via the Po Valley, is done with diesel oil, gasoline, paraffin for planes, bunker oil for ships, to which must be added in marginal, but essential volumes, lubricants, which make engines run, and bitumen, indispensable to make roads safe.

This supremacy of oil has been only slightly undermined over the decades, in Italy mainly with methane cars, but the crisis of 2022 destroyed it. The growth of biofuels, whose global share is around 3%, has been important, while electrics, which have gathered high hopes in recent years, do not reach 1% of the total. In this regard, it should be remembered that China, often praised for its penetration of the electric car, still has a far higher share of conventional cars and consumes 3.5 mbg of petrol and 3.5 mbg of diesel, out of a total consumption of almost 17 mbg.

The progressive concentration of oil demand in transport makes the current crisis somewhat more complicated than the one in the 1970s. At that time, global demand was 40% lower, almost 40 mbg, and also distributed in electricity generation and heating. The two shocks triggered a quick and easy abandonment of heating oil and fuel oil for electricity generation in favour of cleaner and more efficient natural gas. Today, replacing diesel fuel in trucks and cars or paraffin in aircraft is impossible, not only in the short term, but probably also in the long term. These are, among other things, very sophisticated products, both for technical reasons of increasingly high-performance engines and environmental constraints, and must be produced by sophisticated refineries whose facilities are not readily available.

In Europe, after the closure of dozens of refineries, shortages had been evident for some time, with refining margins (difference between product value and crude oil price) already rising above USD 20 per barrel in 2022. In 2025, the EU imported some 25 million tonnes of diesel oil and paraffin from the Persian Gulf, and it is these that caused the strongest price jump in the first 15 days of the crisis. Their weight on the total consumption of the two products in the EU is around 10 per cent, but the rigidity of transport demand, their essentiality, their even military profile, make it necessary to have more refining capacity: a kind of redundancy to compensate for possible shortfalls such as those that are being foreseen, should - let's hope not - the Hormuz disruption last long.