So says the world’s foremost energy watchdog, which just released a new report on the global outlook for oil, its first since Russia’s invasion of Ukraine. It predicts slower economic growth this year, but more opportunities for countries to transition away from oil altogether.

The International Energy Agency’s latest oil market report states that the invasion and the international sanctions that effectively cut off Russia from the global economy placed oil on the brink of a massive international supply crunch. The IEA expects that missing Russian oil and the volatility of the market will “appreciably depress global economic growth.”

But there is a silver—or green—lining.

Oil’s volatility

The IEA report announced that the agency had revised its own forecasts for the year’s oil production. In last month’s oil market report, the IEA predicted that oil output would reach 6.3 million barrels of oil a day this year, but in its newest update, that forecast has brought that number down by 1.3 million for the rest of 2022.

Russia is the third-largest oil-producing country in the world, according to an earlier IEA report, and it accounts for around 10% of the global supply. But Western sanctions against Russia and outright bans on the country’s oil scrambled global production forecasts and sent oil prices spiraling into volatility.

“The implications of a potential loss of Russian oil exports to global markets cannot be understated,” the March report read. 

The IEA points out that, save for an unexpected reversal from other oil-producing countries to increase their output, this missing oil won’t be replaced any time soon, prime conditions for what the IEA calls the “biggest supply crisis in decades.”

Oil prices have already entered a realm of interminable volatility. They briefly soared just shy of $140 a barrel last week after the U.S. announced to be banning Russian oil imports, a number not seen since the 2008 financial crisis, before plummeting back down below $100 by Tuesday. But volatility remains a very real factor, and worst-case scenario forecasts put the barrel price of oil rising to as much as $240 by this summer.

Global oil at a crossroads

Missing Russian oil and a realization among Western nations that Russian energy has propped up their economy for years will prompt renewed discussions on energy security and energy independence, according to the IEA.

“Russia’s invasion of Ukraine has brought energy security back to the forefront of political agendas,” the report reads. “While it is still too early to know how events will unfold, the crisis may result in lasting changes to energy markets.”

The IEA has produced multiple reports in the past few weeks addressing the theme of energy security, the idea that countries can have an uninterrupted flow of energy at an affordable and sustainable price. The agency even produced a ten-point blueprint for the EU to wean itself off Russia’s natural gas and become more energy-self sufficient. 

But reaching energy security takes time, and in the absence of a significant ramping up of output from countries with spare production capacity like Saudi Arabia and the United Arab Emirates, nations will have to turn to other sources to plug the gap.

Tapping into strategic oil reserves, as the U.S. has already begun doing, and balancing market demand for oil with existing stocks can help soften the impact of the supply shock. But the IEA also sees a potential opportunity for countries to expand their renewable energy infrastructure amid the uncertainty surrounding oil.

“The current crisis comes with major challenges for energy markets, but it also offers opportunities,” the report reads. “Indeed, today’s alignment of energy security and economic factors could well accelerate the transition away from oil.”

Europe, the biggest buyer of Russian energy, has so far not joined the U.S. in outright banning oil and gas from the East, but a shift away from relying on foreign fossil fuels towards renewable energy sources is something European leaders have spoken about enthusiastically. 

The EU is targeting for 32% of its energy to be generated by renewable sources by 2030, with a big focus on solar energy and both onshore and offshore wind power.