From oil to AI: The supply chain challenges ahead

Global oil is adapting to Middle East disruption

Energy analysts often say, "Markets find a way." Case in point: the way global oil flows have begun to shift away from the Strait of Hormuz, toward alternative sources centered on South America.

Brazil continues to expand offshore production. Argentina is rapidly growing output from Vaca Muerta. Guyana remains one of the fastest-growing oil producers in the world. Together, these countries are expected to account for a significant share of non-OPEC supply growth, helping create new pathways for crude to reach global markets.

Beyond South America, analysts are increasingly watching parts of Africa. Alternative export pathways are even emerging within the Middle East as producers invest in new pipelines, ports, and export routes. The common theme is diversification: Buyers and producers are seeking to reduce dependence on a small number of regions and trade corridors.

As energy markets adapt, the timeline for normalization in the Middle East remains uncertain.

Meanwhile, fuel inventories remain relatively tight. Data from the U.S. Energy Information Administration continues to highlight below-average distillate inventories and strong export demand, conditions that can contribute to diesel price volatility. For freight transportation, this matters because diesel remains the dominant fuel powering global supply chains.

What it means for shippers

There is an important distinction between the short term and the long term. Over time, global energy markets typically adapt to disruption. New production comes online, infrastructure expands, and trade flows adjust. The growth occurring in Brazil, Guyana, and Argentina is evidence that additional supply is already working its way into the system.

The challenge is that supply chain adaptation takes time. As transportation teams begin planning 2027 fuel budgets, the primary concern is not a lack of global oil supply. The larger challenge is that key supply routes remain disrupted while inventories, production balances, and global trade flows continue adjusting.

As a result, shippers should plan for fuel prices that remain elevated. Even if the multi-year trajectory points toward a more diversified market, the likelihood of that having a positive impact on 2027 budgets is currently low.

Understanding Stop Work Authority in energy supply chains

In the energy industry, safety is a core value that guides daily operations. One of the most important tools supporting that culture is Stop Work Authority, which gives every employee, contractor, and partner both the right and responsibility to stop a job when they observe an unsafe situation.

Effective Stop Work Authority programs share several elements:

• No-retaliation policies that protect individuals who raise concerns or halt work.
• Clear reporting processes that make it easy to communicate unsafe conditions or incidents.
• Empowered employees who understand they have the right and responsibility to stop work when safety concerns arise.
• Immediate response and investigation by supervisors to assess risks and determine corrective actions before work resumes.

While exercising Stop Work Authority may temporarily delay an activity, its purpose is to prevent incidents that could result in injuries, environmental damage, equipment loss, or operational disruption. In high-risk industries like energy, taking a moment to stop, assess, and correct a problem can prevent much larger consequences later.

What it means for shippers

For energy shippers, Stop Work Authority is a reminder that safe operations and reliable supply chains go hand-in-hand. Companies should ensure employees, suppliers, and third-party drivers understand they have the authority to stop work if they encounter an unsafe situation, without fear of retaliation.

How energy shippers can help strengthen a safety culture

• Include drivers in load securement discussions. Drivers are responsible for the load once it leaves the site and can provide valuable input on securement methods, cargo protection, and transportation risks.
• Give drivers time to assess your loads at pickup. Allow them an opportunity to walk around the trailer, inspect the load configuration, and address concerns.
• Recognize proactive safety actions. When someone identifies a potential issue, acknowledge the effort, even if the concern ultimately proves to be minor.
• Promote respectful communication. Safety conversations are most effective when all parties work together toward the shared goal of moving freight safely.

The next bottleneck for AI and the grid: transformers

Utilities, manufacturers, and data-center developers are racing to add power capacity, but many are running into the same obstacle: transformers. The U.S. Department of Energy says wait times for critical grid equipment can stretch more than two years. Some transformer prices have increased four- to nine-fold over the past five years.

Why it matters

Demand for electricity is accelerating as data centers, AI infrastructure, manufacturing projects, and grid upgrades require new connections. At the same time, utilities and suppliers are competing for a limited pool of transformers, switchgear, and other critical grid components.

For many projects, the critical path is no longer just generating electricity but getting the transformers that make it usable. This is especially crucial for data centers, where the cost of many facilities runs into the billions, and missing electrical components can mean zero computing output or revenue.

The logistics impact

• Lead times for power infrastructure are becoming project-critical constraints.
• The largest transformers, weighing hundreds of tons, are difficult to manufacture, transport, and replace.
• Oversized equipment often requires specialized transportation, permits, cranes, and routing plans long before installation begins.
• Delays in a single transformer shipment can postpone facility openings, production expansions, and new energy generation projects for utilities.

What shippers should consider

• Engage logistics providers early, preferably during the front-end engineering design (FEED) stage.
• Don’t treat power infrastructure as a late-stage procurement task. It’s a critical supply-chain dependency.
• Secure transformer and grid-equipment orders as early as possible and build lead times into project plans.
• Coordinate closely with utilities, equipment suppliers, and logistics partners to identify potential bottlenecks. Build in schedule flexibility and contingency plans.

Tariff updates

• New U.S. tariffs on select Canadian goods went into effect August 22 and Canadian retaliatory tariffs are slated to begin September 8, but the measures are targeted and affect a relatively small share of overall cross-border trade. The $20 billion in targeted American goods represents only about 5% of Canada’s U.S.-bound exports, and the retaliatory tariffs similarly cover $20 billion in U.S. goods. For now, North American supply chains remain highly interconnected, though businesses should identify exposure to tariff-sensitive products and prepare contingency plans if negotiations over the U.S.-Mexico-Canada Agreement deteriorate.
• U.S. Customs has delayed the final phase of tariff refunds.
• A crackdown on using transshipping to evade U.S. tariffs has been announced.

For more, go to the Trade Policy & Customs section of this report.

Table of Contents