The Last Oil Shock: Why the Iran Energy Crisis May Finally End the Age of the Combustion Engine

In October 1973, American drivers pulled up to petrol stations and found them empty. The Arab members of OPEC had cut off oil exports to the United States in retaliation for its support of Israel during the Yom Kippur War. The price of a barrel of crude oil rocketed from roughly $3 to nearly $12 — a 400% increase that hit consumers almost overnight. Six years later, the 1979 Iranian Revolution toppled the Shah and sent prices surging to nearly $35 a barrel (approximately $144 in 2026 dollars). Together, these two crises permanently rewired the relationship between Western consumers and the internal combustion engine.

The 2025/2026 Iran energy shock, triggered by renewed conflict disrupting Persian Gulf supply chains, carries unmistakable echoes of those earlier crises. The difference this time is that the alternatives are far more mature.

What Is Different This Time?

What makes the current moment distinct is not the disruption itself — it is what consumers are being disrupted toward. In 1973, the only alternative to a large American V8 was a smaller petrol engine. Today, there is a fundamentally different option, and it is becoming cheaper by the year.

Running costs tell an equally compelling story: charging an EV costs the equivalent of paying 40 to 60 cents per litre of petrol — roughly half to a third of pump prices, even before the current Iran-driven spike. This is no longer an environmental argument. It is an economic one.

Can US Tariffs Stop the Chinese EV Tide?

The United States has placed its bet on the tariff wall. In 2024, the Biden administration raised duties on Chinese electric vehicles to 100% — maintained and extended under the Trump administration. Without tariff protection, Chinese EVs — manufacturable and shipped to the US at $25,000–$30,000 for a competitive family car against the US average of over $50,000 — would devastate domestic production within years rather than decades.

The answer increasingly appears to be not confrontation, but convergence. President Trump has framed the position clearly: Chinese vehicles are welcome in the United States as long as they are built in the United States.

The most instructive live example is the ongoing technology discussions between Ford Motor Company and Geely — covering battery architecture and drivetrain licensing. Volkswagen has moved further still, deepening its partnership with SAIC and taking a strategic stake in Xpeng. These are rational responses to a technology deficit that tariffs alone cannot close.

The commercial freight sector sharpens the urgency. Electric trucks and delivery vehicles — led by BYD's commercial division, Volvo Electric, and US-based Rivian — are already demonstrating total cost of ownership advantages over diesel on high-utilisation routes. Fuel represents 25–35% of operating costs for a long-haul fleet; electrification is compressing that figure dramatically.

Is There a Guaranteed Outcome?

The fuel price shocks of 1973 and 1979 demonstrated beyond doubt that consumers will abandon the combustion engine when the economics compel them to. What is new in 2025 is that electric vehicles are becoming the cheapest option to buy and the cheapest to run. When a fuel crisis pushes up the cost of staying with petrol and the alternative has never been more affordable, the decision is no longer ideological — it is mathematical. Demand for electric passenger vehicles globally reached a record in March/April 2026.