US Midterm Elections, Oil Prices and Pakistan’s Energy Security

Key takeaways:

• The US midterm election results alone are unlikely to significantly influence oil prices without tangible progress towards a lasting agreement between the US and Iran.

• Oil prices continue to reflect a substantial geopolitical risk premium, estimated at $30 to $40 per barrel. Meanwhile, the ongoing Russia and Ukraine conflict adds further pressure, particularly on diesel markets.

• Energy markets could recover relatively quickly following a lasting peace agreement. Oil and gas resources remain abundant, with logistical disruptions rather than resource scarcity posing the main challenge.

• Middle Eastern producers have demonstrated remarkable resilience in restoring energy exports despite widespread disruptions. However, only a limited number of proposed alternative export routes may prove commercially viable.

• Pakistan’s heavy reliance on energy imports from the Middle East exposes its economy and vulnerable households to price shocks. Diversifying energy sources, suppliers and import routes should therefore become a policy priority.

• Improving energy efficiency and managing domestic demand could further strengthen Pakistan’s energy security while reducing waste and limiting exposure to future crises.

• Energy shocks are unlikely to disappear anytime soon, making diversification, preparedness and resilience essential for navigating future market disruptions.