By Olarinre Salako
In free-market economics, demand and supply determine price. When they are in equilibrium, prices stabilize, and households, firms, and investors can plan with confidence.
Government exists primarily for the welfare of its people. A capable state does not wait for crisis; it builds stabilizing systems in advance. Across the world, governments intervene in essential sectors like food and energy to prevent breakdowns when supply shocks push prices beyond affordability.
Our focus today is energy—oil and gas—because changes in energy prices transmit through transport, manufacturing, food, and household costs.
The Emerging Global Energy Crisis
The war involving the United States, Israel, and Iran, which began on February 28, 2026, has disrupted global supply expectations and the logistics of crude oil and refined petroleum products. The Strait of Hormuz, through which roughly one-fifth of the world’s oil supply passes, has come under severe geopolitical stress. Heightened military activity across the Gulf has increased risks to critical petroleum infrastructure—oilfields, terminals, and refineries.
The result is already visible: Brent crude has surged above $110 per barrel, approaching $120 as traders price in uncertainty. An Iranian military spokesperson, Ebrahim Zolfaqari, reportedly warned markets to “get ready for oil to be $200 a barrel.”
We are, indeed, in a dangerous moment.
This is precisely when nations reveal the statecraft they have built quietly over time—systems designed not for normal periods, but for disruption.
For countries like Nigeria—where fuel import dependence and pricing pressures directly affect daily life—such disruptions translate quickly into hardship. Even with the Dangote Refinery operational, Nigeria still spent close to ₦9 trillion (about $10 billion) on petrol imports in 2025, according to data from the National Bureau of Statistics, underscoring the scale of demand. The country remains exposed to global supply shocks and price volatility, and households are already feeling the impact following fuel subsidy removal, with the emerging crisis likely to amplify global price transmission.
Strategic Oil Reserves as a Shock Absorber
When governments leave essential markets without buffers during supply shocks, temporary increases in price can harden into inflation, and households absorb the pain.
In the global imagination, the United States is the center of free-market capitalism. Yet in moments of stress, it demonstrates a deeper truth: free markets do not eliminate the need for state capacity; rather, they depend on it.
At the heart of the U.S. response is the Department of Energy (DOE)—responsible for energy policy, nuclear security, strategic reserves, and emergency response. It operates one of the most sophisticated energy shock-absorption systems in the world. Its functions span roles that, in Nigeria, are distributed across multiple institutions and ministries—power and petroleum, including the Nigerian National Petroleum Company Limited.
The centerpiece is the Strategic Petroleum Reserve (SPR)—a vast stockpile of crude oil stored in underground salt caverns along the Gulf Coast, with a capacity of 714 million barrels—more than one year of Nigeria’s production—and a current inventory of about 416 million barrels. It is distributed across four major sites in Texas and Louisiana—a national asset designed to provide emergency supply when normal systems break down.
On March 12, 2026, the United States announced the release of 172 million barrels from the SPR, to be delivered over about 120 days. This is not a random intervention. It is calibrated—large enough to influence markets, yet structured to preserve system stability. The strength of the SPR lies not only in scale, but also in speed. Following presidential authorization, DOE executes these releases through structured sales and exchanges. Oil can enter the market in as little as 13 days, with a drawdown capacity of about 4.4 million barrels per day.
The SPR is a survival tool created after the 1973–74 oil embargo. It reflects a deliberate lesson: energy shocks are inevitable, but their effects can be managed. Past deployments—during wars, hurricanes, and global supply disruptions—have reduced gasoline prices by as much as 40 cents per gallon. Yet its limits are clear: it cannot replace prolonged supply loss. It is designed to buy time—for markets to adjust, for supply chains to respond, and for governments to act with clarity rather than panic.
International Coordination as a Shock Absorber
As disruption in the Gulf reverberates through Asia, Europe, Africa, and the Americas, no single country can stabilize global oil markets alone.
This is where the International Energy Agency (IEA) becomes critical. Like the SPR, it was established in 1974 in the aftermath of the global oil crisis. Headquartered in Paris, the IEA comprises 32 member countries, mostly advanced economies, alongside a growing network of partners. Through the IEA, members coordinate responses to supply disruptions. In the current situation, the U.S. release forms part of a broader IEA-led 400-million-barrel collective action. This signals to markets that supply is being mobilized by a coordinated system of economies.
Major importing economies outside the IEA, such as China and India, are also adjusting procurement strategies to manage price volatility.
In energy markets, expectations move almost as fast as physical supply, and coordinated action reduces panic before speculative spikes fully materialize.
The IEA also engages non-member countries, including major producers. While the Organization of the Petroleum Exporting Countries (OPEC) manages supply, many of its members interact with IEA economies and respond to market shifts.
Logistics and Policy Flexibility as Shock Absorbers
There is also a third layer: logistical flexibility. Temporary policy adjustments ensure supply reaches where it is needed.
In this crisis, the U.S. issued a waiver of the Jones Act—part of the Merchant Marine Act of 1920—which ordinarily requires that goods transported between U.S. ports be carried on U.S.-built, U.S.-owned, and coastwise-qualified vessels. The waiver allows foreign vessels to transport fuel between domestic ports, easing bottlenecks and accelerating distribution.
Beyond logistics, the U.S. has also deployed sanctions flexibility—allowing restricted oil already in transit from countries such as Iran and Russia to reach markets.
This is statecraft in action.
The same government that imposes sanctions can temporarily relax them to stabilize markets. In energy crises, necessity overrides ideology. Taken together, these elements form a system in which strategic reserves provide volume, international coordination provides confidence, and policy flexibility provides flow.
Energy as State Capacity
What, then, is the deeper lesson? Energy security extends beyond oil production and refining capacity. It is about state capacity—the ability to design systems that provide protective mechanisms during global energy crises.
The Strategic Petroleum Reserve is infrastructure. The Department of Energy is institutional capability. The International Energy Agency is coordinated diplomacy. _Together, they reflect a broader truth: the true measure of energy power lies not in production capacity, but in resilience under stress.
The global system reinforces this idea. Two parallel structures operate simultaneously: OPEC influences supply, while the IEA manages demand-side security. Nations that understand both do not merely participate in global energy markets—they help stabilize them for domestic macroeconomic strength and, more importantly, for microeconomic stability at the household level.
That is the _distinction between resource ownership and energy statecraft. Is the Nigerian state prepared to absorb the emerging global oil disruptions—the end of which is not yet clear? That is a question we will return to in Part 2.
Also published in The Nigerian Tribune: Monday Backpage Column – Systems and Society. March 23, 2026
