Global Energy Shocks Explained by Top Economist, Severin Borenstein

How war disrupts global energy markets, drives oil price volatility and supply chain risks, and shifts demand to LNG and EVs

Energy markets look chaotic in wartime. Prices spike, politicians react, and media narratives harden almost overnight. Much of that apparent chaos is actually predictable, according to Severin Borenstein, if you’re willing to look closely enough at how energy systems really work.

That’s the premise behind my conversation with the professor at the Energy Institute at the University of California, Berkeley, and one of the clearest thinkers on energy economics. In a recent blog post, he argues that many of the price shocks and supply disruptions we’re seeing today aren’t mysterious at all. They’re the logical outcome of global supply and demand dynamics playing out under stress.

That sounds simple. It isn’t.

Because the global energy system is no longer simple. Oil is traded on a fully integrated global market. Natural gas is not. North America operates in a semi-isolated gas system, while Europe and Asia are exposed to global liquefied natural gas flows. Add in fertilizers, diesel, shipping bottlenecks, and geopolitical choke points like the Strait of Hormuz, and you begin to see the complexity policymakers are dealing with, often poorly.

Borenstein’s central insight is uncomfortable: we keep misreading price signals. Short-term spikes get interpreted as long-term trends. Political pressure builds for infrastructure—pipelines, LNG terminals—that take years or decades to complete. Meanwhile, futures markets are already signaling that today’s high prices may not last.

This matters for Canada. The debate over pipelines and LNG expansion is being driven, in part, by the latest crisis. But energy infrastructure decisions are long-cycle bets. Build based on today’s price spike, and you risk locking in yesterday’s logic.

At the same time, the deeper structural forces are moving in the opposite direction. Electrification is accelerating in Asia. Demand for oil may weaken over time, not strengthen. Ironically, one of the biggest threats to electric vehicles may be success itself: as oil demand falls, prices could collapse, making gasoline a tougher competitor again.

Layered on top of all this is a bigger, more uncomfortable reality. The global energy system is more integrated than ever. That integration brings efficiency and resilience—but also vulnerability. Disruptions no longer stay local. They cascade.

So the question isn’t whether we can insulate ourselves from global shocks. We can’t. The question is whether we understand them well enough to respond intelligently.

That’s what this conversation is really about.