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Qabil Ashirov

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Geopolitical events around the world, particularly the potential for conflict between the United States and Iran, have once again brought oil prices and their future trajectory into focus. While oil prices are fundamentally driven by supply and demand, they are equally sensitive to geopolitical developments. Any confrontation involving Iran would almost certainly push prices higher, though it is impossible to predict exactly how high they could go. Meanwhile, developments in the global economy continue to generate conflicting forecasts about oil’s path.

Historically, oil prices reached their peak in 2007–2008, with a barrel climbing to roughly $150. This surge was driven by a combination of objective and subjective factors. On the demand side, China—then the world’s most populous country—saw economic growth of around 10% annually. This growth fueled the construction of new industrial facilities, increased household energy use, and boosted transportation demand. Europe and the U.S. also experienced economic growth, contributing to steadily rising global demand.

On the supply and geopolitical side, the world witnessed significant upheavals. The U.S.-led invasion of Iraq, Venezuela’s political shift under Hugo Chávez, and fears of further Middle Eastern instability, including potential conflict in Iran, raised market expectations for higher prices. While markets reacted quickly, OPEC struggled to keep pace, and oil prices surged dramatically.

However, the rapid rise was followed by a sharp decline after 2008. The collapse of Lehman Brothers triggered the bursting of the housing bubble in the U.S., which in turn caused a recession across Western markets. China’s economic growth also slowed. The anticipated Iranian invasion did not occur, and new technologies, particularly the U.S. shale revolution, brought additional oil to the market. Russia and Saudi Arabia, by keeping prices under $50, further accelerated the decline.

Looking at today’s world, there are some parallels to the 2000s. Russia, one of the largest oil exporters, struggles to sell its oil freely due to sanctions. Tensions between the U.S. and Iran persist, fueling speculation about potential strikes or a civil war in Iran similar to Syria. Meanwhile, China’s economy grows at 5–7%, and other fast-growing economies, including India and Bangladesh, continue to expand at roughly 5–7%, a trend that has persisted for several years. On the supply side, oil fields are steadily exploited, reducing output by roughly 5% annually, which necessitates an additional 6 million barrels entering the market.

Taking these factors into account, a key question arises: Could oil prices reach $150 again? If a war breaks out in Iran, it is impossible to predict exactly what would happen. However, if no such conflict occurs, claiming that oil prices will rise significantly would be misleading. Why? Because new oil wells are being drilled and brought online, and there are dozens of similar examples worldwide. Even if these wells are not yet producing at full capacity, they will contribute to supply in the near future.

A prime example is Azerbaijan, where new wells are expected to drive another oil boom by 2030. Even countries that were not traditionally oil producers, like Turkiye, are actively exploring oil in the Black Sea. The Turkish Petroleum Corporation (TPAO) has signed a memorandum with Chevron of the U.S. to cooperate on oil exploration and production. Turkiye’s Energy Minister, Alparslan Bayrakdar, stated that the companies will also collaborate on international projects, with the goal of starting production in the Black Sea and transforming TPAO into a globally competitive energy company.

In January, TPAO also signed an agreement with ExxonMobil, under which the companies will jointly develop projects in the Black and Mediterranean Seas, as well as in Iraq, Russia, and Somalia. According to Bloomberg, Turkiye is one of the countries most in need of hydrocarbons, and its partnership with the U.S. could help address this challenge.

Equally important is the rapid global shift toward renewable energy. Countries like Spain and Portugal already generate nearly 100% of their electricity from green sources, while nations like Turkiye have reached roughly 50%. Azerbaijan is projected to achieve over 30% renewable energy by 2030. It is worth noting that these countries are a tip of an iceberg.

Another major sector where oil is heavily used is transportation, which is undergoing fast electrification. New electric vehicle models are hitting the market, and some countries are introducing laws requiring city fleets to switch entirely to electric. In Europe, numerous projects are exploring full electrification of home heating and cooking.

Overall, geopolitical risk remains the wildcard, but the combination of new oil supply, technological advances, and energy transition means that while volatility will continue, oil prices are unlikely to hit the peaks of the 2000s without a major, unforeseen disruption.