Fuel Shortages And Price Uncertainty: What Past Oil Shocks Can Teach Us About Infrastructure Contracts Today

This is the first article in a series examining the legal and contractual implications of fuel supply disruptions, shortages, and price volatility.
 

The oil crises of the 1970s were not only major energy, political, and economic events. They were also the catalyst for a major shift in how infrastructure owners, public authorities, contractors, and stakeholders operated, and how they approached their pricing, logistics, and procurement. The crises also caused significant challenges for all stakeholders. Their legacy can still be seen in modern fuel-adjustment clauses and escalation mechanisms.

Amid ongoing uncertainty surrounding shipping through the Strait of Hormuz and the continued geopolitical instability in the Middle East, concerns regarding energy supply shortages are becoming increasingly prevalent. Industries such as airlines and farming are already experiencing the effects of from such shortages and high fuel prices, and it is likely that similar situations will occur with major infrastructure projects.

In this article, we offer an overview of historical fuel crises, related precedents, and the lessons learned from them, providing perspective on current energy supply issues and possible remedies.

Key takeaways

• Infrastructure projects are exposed to fuel costs and shortage risks both directly, through diesel-powered equipment and haulage, and indirectly, through asphalt, aggregates, freight and other fuel-linked inputs.
• Historical records show that uncertainty can be as damaging as a physical shortage because it affects bids, delivery commitments, schedules, and pricing.
• Several Canadian provinces and public authorities are addressing fuel-cost volatility through published indices, formulas, or adjustment clauses instead of leaving the issue entirely to post-project disputes.

1. Fuel shortages and energy shocks

Fuel shortages and energy shocks are often discussed as macroeconomic events. Infrastructure projects experience them far more concretely. A road, bridge, transit or civil-works contract encounters fuel risks that extend beyond increases in diesel prices at the pump. That risk is also reflected in excavation equipment, asphalt production, and supplier delivery schedules, as well as in the fundamental question of whether a bid submitted today will still make commercial sense when the work is mobilized weeks or months later.

The 1974 Circular Fuel Usage Factors for Highway Construction captured the importance of fuel for infrastructure projects,¹ including gallons per cubic yard for excavation and Portland cement concrete pavement, gallons per ton for aggregates and asphalt concrete, and gallons per US$1,000 for structures and miscellaneous constructions. Fuel was not and is still not an incidental overhead: it is embedded in the work itself. In fact, the 1974 Circular detailed gasoline and diesel use, breaking them down by activity and unit of work, including excavation, aggregate operations, asphalt concrete, structures, and miscellaneous construction. It converted an energy shock into project-level inputs that owners, contractors, and bidders could actually measure.

That perspective matters because the oil shocks of the 1970s are often remembered through the lens of consumer inconvenience, long lines at the gas stations, high inflation, recessions, and problematic geopolitics. In project delivery, however, they were also early stress tests for procurement systems and construction contracts. The first shock followed the 1973-1974 Arab oil embargo,² while the second was tied to the Iranian Revolution and the supply dislocation that followed in 1978-1979.³

The International Energy Agency (hereinafter the “IEA”) was created in response to the first crisis, which exposed how industrial economies had become vulnerable to interruptions in oil supply. For infrastructure, those episodes revealed not only the consequences of scarcity but also the deeper commercial problem created by uncertainty: uncertain supply, uncertain prices, uncertain delivery dates, and uncertain public budgets.

One simple example of the impact of these crises was the lowered speed limits: as we will see below, it was done in an effort to reduce gasoline and diesel use.

The experiences of the 1970s energy crises are more relevant today considering that the Executive Director of the IEA, Fatih Birol, said on April 23, 2026, that the current crisis is “the greatest threat to global energy security in history.”⁴ The IEA also indicated in its March 2026⁵ report that:

“(t)he war in the Middle East is creating the largest supply disruption in the history of the global oil market. With crude and oil product flows through the Strait of Hormuz plunging from around 20 mb/d before the war to a trickle currently, limited capacity available to bypass the crucial waterway, and storage filling up, Gulf countries have cut total oil production by at least 10 mb/d. In the absence of a rapid resumption of shipping flows, supply losses are set to increase.”

In April 2026, it was reported that more than 60 countries have already introduced some type of mitigation measures or restrictions to limit the impact of the energy shock.⁶

Accordingly, a historical analysis of some of the legal impacts of past energy crises on infrastructure projects is quite relevant today, particularly as stakeholders seek to mitigate the possible fallout on infrastructure projects deriving from the current situation.

The purpose of this article is therefore to use the 1970s energy crises as a practical lens for two current legal questions:

• What do past oil shocks tell us about infrastructure contracts today?
• What are the current mechanisms in place across some Canadian provinces?

2. How the 1970s oil shocks impacted infrastructure projects

What matters for infrastructure owners, contractors, and public authorities is how those shocks altered project delivery. The historical record is not limited to scarce fuel, queues at service stations, or generalized economic unease; it shows unstable pricing, delayed procurements, interrupted works, public call for tender distortions, and severe pressure on public budgets. In that sense, the oil shocks of the 1970s read like a case study in modern construction risk, project delivery, supply-chain fragility, and contract administration.⁷

The market and governments did not respond with a single measure; they deployed a layered toolkit that combined supply allocation, demand restraint, and emergency operating changes. In practical terms, that toolkit included project-specific fuel allocations in the United States, conservation and contingency planning in Canada during the 1979 shock, lower speed limits, and, in some jurisdictions, shorter work weeks or broader restrictions on commercial energy use.

In the United States, the measure most directly relevant to infrastructure was fuel allocation by the Federal Energy Office regulations and based on the Emergency Petroleum Allocation Act of 1973.⁸ The Act imposed various price controls, as well as fuel allocation mechanisms to the United States. Author Henry A. Sawchuk reported in 1974 that 32 U.S. states were experiencing fuel shortages in highway construction projects and estimated that between 500 and 1,000 highway projects had been interrupted by March of that year.⁹ He also noted that several states had cancelled or delayed procurements because contractors could not obtain reliable fuel-price quotes or guarantees of delivery.

To mitigate the inequities created by allocations tied to 1972 consumption, the Federal Energy Office regulations allowed public bodies and contracting agencies to obtain project-specific fuel allocations and transfer them to the successful bidder. Highway authorities and contractors promoted technical conservation measures within projects themselves, including reduced use of cutback asphalts, smaller or staged projects, and even contemplated worker carpooling. Even at the height of the crisis, the response was moving toward project-specific administration rather than leaving each contractor to solve the problem alone.¹⁰

Governments also sought to curb demand from the public rather than merely reallocate scarce supply. The clearest North American example is the 55 mph national maximum speed limit imposed in the U.S., enacted on January 2, 1974, through the Emergency Highway Energy Conservation Act.¹¹ President Nixon presented the measure as a direct fuel-saving response to the crisis and estimated that compliance could save nearly 200,000 barrels of fuel a day.¹² For infrastructure purposes, the significance of the measure is broader than fuel conservation alone: it shows that oil shocks altered not only project inputs and construction costs but also the regulatory assumptions governing the use of the network itself.¹³ In order to curtail fuel demand, governments also introduced new fuel efficiency standards and a revised approach to vehicle designs.¹⁴

Canada fits the same pattern, although the historical record is better framed in terms of conservation policy and contingency planning rather than gasoline rationing. Ottawa’s 1979 budget materials framed the issue in terms of constraining oil demand, conservation, and reducing dependence on imported oil. The federal response therefore treated fuel stress as a matter of demand management and emergency planning, and not simply as a market problem to be left to price alone.¹⁵

Shorter work weeks were also considered in the U.S. highway sector namely as a fuel-saving option, with the Federal Highway Administration concluding that shortening the work week could conserve fuel with a lighter employment impact than a full shutdown.¹⁶ The option was considered, but eventually it was not implemented in the U.S. On the other hand, Britain adopted the Fuel and Electricity (Control) Act 1973¹⁷ as well as a three-day working week, namely as a response to high inflation and workers’ industrial actions. These measures compressed commercial and industrial activities under emergency electricity restrictions.

The broader lesson is that governments managed energy scarcity not only through pricing and allocation but also by directly restricting the time in which work and production could occur.

Pressures on public finances

Another impact of the energy shocks was that they coincided with a weakening of public finances. A 1974 Purdue Road School paper, Impact of the Fuel Shortage on Highway Funds in Indiana, argued that the state of Indiana already needed more than $US28 million annually just to keep pace with existing highway maintenance requirements.¹⁸ It shows how quickly an energy shock becomes an issue for public authorities responsible for projects and maintenance. Hence, public authorities did not confront these shocks from a power position; existing maintenance deficits and aging assets amplified the effect of rising costs.

An energy shock creates a double squeeze through both higher project costs and weaker fiscal resilience. History shows how quickly that combination drives reprioritization of projects and allocation of public funds. These conditions can lead to deferred maintenance, rescheduled procurements, narrowed scope, or pressure to shift risk back onto the private side of the contract. Those are precisely the conditions in which claims, disputes, and serious project-level financial consequences begin to multiply.¹⁹

The second oil shock further reinforced rather than displaced those lessons. By 1979, governments were already treating fuel shortages as transport and economic contingencies requiring coordinated conservation and administrative responses.

3. When fuel becomes an infrastructure problem

Infrastructure projects are excessively vulnerable to energy shocks because fuel is intertwined in infrastructure work from more than one direction. Diesel powers loaders, dozers, pavers, graders, cranes, generators, and haul trucks. Gasoline and propane support lighter vehicles and smaller equipment, and they are omnipresent on jobsites. The exposure is therefore direct and immediate: every day of operation consumes a measurable quantity of fuel.²⁰

A second layer of exposure is less apparent, yet just as important: aggregates must be extracted, processed, and transported. Freight costs rise or fall with the economics of the logistics chain. Asphalt, a refining by-product, remains indispensable to most road construction, while cement and concrete production depend on energy-intensive industrial processes. Of course, any cost increase in these processes increases the overall costs for contractors.

Accordingly, when fuel markets become unstable, a contractor is not merely paying more to operate its own fleet; it is absorbing simultaneous pressure on site operations, supplier pricing, and material movement.²¹

Time is the second major feature, given the uncertainty with the overall cost of fuel over extended periods. Long-duration projects are more exposed than short procurements because the commercial assumptions behind the bid must survive a longer period. With the current level of uncertainty, this task becomes excessively difficult. When a contractor prices a paving season or a multi-year civil project in a volatile fuel market, they must consider current pricing as well as the risk of further fluctuations before the work is complete. Suppliers react very much in the same way. Validity periods of quoted fuel prices or supply prices are shortened, delivery promises become more conditional and uncertain, and guaranteed volumes become harder to secure. In practice, a project can therefore begin to suffer well before there is any shortage on the jobsite.²²

Solutions from the 1970s and modern fuel-adjustment mechanisms

Subsequent research confirms the same dynamic. The Oregon study on fuel-usage factors, prepared with Federal Highway Administration support, noted that major price changes in key inputs lead contractors to inflate bids to cover likely increases during the duration of the project, possibly leading to disputes.²³ These risks and the increased contractor contingencies were among the strong arguments for the introduction of price adjustment clauses for gasoline and diesel.

The National Cooperative Highway Research Program in the United States similarly treated fuel-adjustment clauses as tools for reducing unnecessary contingencies and aligning compensation more closely with actual market movements.¹ The policy logic behind such clauses is therefore not merely remedial. It is procurement-oriented: they reduce hidden contingencies, improve bid comparability, and give serious bidders greater confidence that extraordinary volatility will be administered rationally rather than litigated after the fact.²⁵

In light of the foregoing, we conclude that oil shocks affect infrastructure through four main channels on the majority of projects:

The most resilient contracts are the ones that recognize the above-mentioned channels in advance.

4. How Canadian provinces currently manage the risk

Current provincial authorities and public bodies increasingly address fuel volatility through contractual risk-allocation mechanisms.

Quebec

In Québec, these mechanisms refer primarily to a fuel price adjustment mechanism (named in French as “ajustement du prix du carburant”), which applies to some of the province's road-infrastructure projects and has been in force for a few years already. In this respect, the 2026 Cahier des charges et devis généraux (also known as the “CCDG”) of Québec’s Ministère des Transports et de la Mobilité durable (hereinafter the “MTMD”), details the requirements applicable to the adjustment in its article 8.9.²⁶ However, it must be noted that some limitations apply, namely: the adjustment mechanism only applies to diesel, unforeseen work is excluded from the clause, and a variation of 5% must occur before the clause will be applicable.²⁷

It is also worth noting that similar risk-management instincts appear at the level of various major public bodies, although not always through a stand-alone fuel index. In Québec, the Société québécoise des infrastructures (hereinafter the “SQI”) has adopted a related, though broader, approach for certain building projects, by temporarily integrating a clause adjusting the price of certain materials and equipment in order to reduce the impact of rising bid prices, reduce contingencies and manage volatility risks.²⁸ The SQI published guidance indicating that the adjustment is calculated either upward or downward by reference to applicable Statistics Canada price indices. As a baseline, it compares the values of these price indices at the bid-closing date with the date on which the material or equipment is included in a monthly payment request by the contractor.²⁹

It is not a fuel-specific mechanism in the same sense as Québec’s road-infrastructure diesel adjustment, but it reflects the same underlying logic: where volatility is real and measurable, the better course may be to administer it through an agreed formula rather than leave it to be managed entirely by the contractor or in post-award claims.

Ontario

Ontario provides a strong road-sector example. The Ontario Ministry of Transportation’s (the “MTO”) General Conditions of Contract include a specific “Payment Adjustment for Changes in the Fuel Price Index,” under which monthly progress payments to the Contractor are adjusted on a monthly basis as a matter of course by reference to the Owner’s diesel fuel price index, which is calculated by the Ontario Ministry of Energy and based on the rack price, including taxes, of diesel fuel. This fuel price index is then published on the first Friday of each month in the contract bulletin published by MTO for owners. Notably, the General Conditions of Contract also state that the compensation provided by the monthly adjustment mechanism is to be used for the purpose of providing fuel price adjustment compensation to suppliers and shippers.³⁰

The mechanism is explicitly road-oriented rather than merely conceptual: the fuel-consumption table applies namely to work items such as clearing, excavation, granular backfill, asphalt pavement, milling, pulverizing, concrete pavement, drainage work, and rock supply.³¹ Ontario’s approach therefore does not simply acknowledge fuel volatility in principle; it translates that volatility into a road-specific administrative formula tied to measurable quantities of highway work. In haulage-heavy work, the commercial pressure caused by fuel volatility often sits below the prime contract. Ontario's approach recognizes that a clause is much less effective if it compensates the prime contractor but ignores the tiers where the cost is actually felt.

Alberta

Alberta illustrates another useful drafting point: objectivity. Alberta Transportation and Economic Corridors has a diesel fuel cost adjustment option applicable to significant grading or surfacing projects meeting certain specified thresholds, as detailed in General Specification 1.2.58.³² The price adjustment is applied to the monthly estimate payments payable to the Contractor when the monthly price index varies by more than 15% from the baseline price set out in the contract, resulting in either a rebate being credited to the Department or a price increase payable to the Contractor.

It uses a monthly price index established each month by the Department (and published on the Department's website), calculated in one of two ways:³³ based on the average Edmonton and Calgary rack rates for low sulphur diesel published by the Oil Price Information Service (“OPIS”); or based on the average of Edmonton and Calgary values for Monthly Average Retail Prices for diesel fuel as published by Statistics Canada.³⁴ It must be noted that adjustments apply only to low sulphur diesel fuel and at specified consumption rates applicable to eligible categories of work. These consumption rates are not adjusted based on equipment choices, type of fuel, construction methodologies, efficiencies, or haul distances.

British Columbia

British Columbia's hired-equipment program points in the same direction. The province adjusts hourly rates for hired equipment each month using Natural Resources Canada fuel averages and fixed litres-per-hour assumptions for on-road and off-road equipment.³⁵ Although this is not a universal project-compensation clause applicable to all construction work in British Columbia, it remains a strong example of the same underlying principle: the province favours a determined price adjustment mechanism than proof of actual impacts. That is often the best way to manage a commodity risk that is widespread, foreseeable, and administratively expensive to verify in perfect detail.

These approaches all have limitations. For example, the mechanism in Québec only applies to diesel, and not to other fuels like gasoline or propane, and it does not cover the entirety of diesel costs or increases. In addition, these mechanisms do not apply to secondary costs such as those for additional costs for aggregates or transport surcharges of suppliers.

Some mechanisms appear in general conditions, some in special provisions and some in related transport or hired-equipment frameworks. Overall, the resemblance is clear. In addition, provinces increasingly use published fuel benchmarks, baseline dates, work-item assumptions and periodic payment adjustments to reduce the destabilizing effect of fuel volatility on procurement and project delivery.

Provincial approaches at a glance

These examples are illustrative only. The applicable mechanism always depends on the current tender documents, general conditions, and special provisions for the particular project.

Taken together, these agency-level examples all point to the same conclusion: modern public authorities are not ignoring volatility, but they are managing it through different contractual architectures depending on project type, delivery model and sector. However, none of these examples are designed to address actual shortages as was the case in the 1970s when diesel was not only expensive but physically unavailable. In the event the current energy crisis leads to actual shortages, then it would be possible to see the return of fuel allocations by government systems, price caps for fuel and a reduction of non-infrastructure energy use through reduced office attendance.

Viewed together, these provincial examples show that the modern response to fuel volatility is not to pretend the risk does not exist. It is to translate the risk into a formula, a benchmark, or an index before the work is underway. That approach serves more than one interest. It can make bids more comparable, reduce hidden contingencies, improve transparency, and create a better factual record if a dispute later arises. In short, it shifts fuel risk from the realm of surprise toward the realm of contract administration.

Conclusion and possible mitigation measures

The oil shocks of the 1970s were not merely episodes of geopolitical drama. They were infrastructure shocks. They delayed projects, distorted bidding, destabilized supply chains and forced public bodies to confront the fragility of assumptions that had once seemed fixed: the availability of fuel, the price of key materials, and the stability of prices over time. Their most enduring lesson is not simply that energy markets can turn abruptly. It is that infrastructure delivery is placed in peril when a critical input, such as fuel, is treated as background noise rather than as a contractual risk.

This is why the provincial mechanisms now in place matter. Québec’s diesel-adjustment framework, Ontario’s indexed payment provisions, and the formula-based approaches adopted in Alberta and British Columbia all reflect the same institutional instinct: measure the problem before it becomes a dispute.

However, those mechanisms may not be sufficient in the face of the current energy shock. They are designed primarily to manage volatility in price, not necessarily actual scarcity of supply. If present conditions were to deepen into sustained or widespread shortages, as was the case in the 1970s, public bodies might need to revisit some of the tools used in the 1970s, not only to address cost escalation but also to respond to shortages and ensure the continuation of infrastructure projects.

Some measures, such as shortened workweeks, resemble those adopted during the COVID-19 pandemic. This suggests that remote work could also serve as a strategy to reduce fuel demand, as is currently being promoted by the Korean government to lower fuel consumption.³⁷

For owners, contractors, and stakeholders the practical message is straightforward. A fuel crisis is rarely just a fuel crisis. It is at once a pricing problem, a logistics problem, and a procurement problem. Contracts that recognize those dimensions in advance are far better positioned to withstand the current shock.

If you have any questions about this article or its implications for your business or projects, please contact one of the authors or a member of Gowling WLG's Infrastructure and Construction Group.

Footnotes

1. Transportation Research Board, Fuel Usage Factors for Highway Construction, Highway Research Circular No 158 (Washington, DC: TRB, 1974).

2. United States, Department of State, Office of the Historian, "Oil Embargo, 1973–1974" in Milestones in the History of US Foreign Relations (Washington, DC: US Department of State).

3. Laurel Graefe, "Oil Shock of 1978–79" (November 22, 2013), Federal Reserve History (Atlanta: Federal Reserve Bank of Atlanta, 2013).

4. Fatih Birol, Executive Director, International Energy Agency, interview with CNBC at CONVERGE LIVE, Singapore (April 23, 2026).

5. International Energy Agency, Oil Market Report — March 2026 (Paris: IEA, 2026).

6. Josh Gabbatiss, "Iran war analysis: How 60 nations have responded to the global energy crisis" (April 8, 2026), Carbon Brief.

7. Henry A Sawchuk, "The Impact of Materials and Fuel Shortages on Highway Construction and Maintenance" (presented at the Purdue Road School, 1974) hereinafter Sawchuk. .

8. Emergency Petroleum Allocation Act of 1973 (EPAA), Pub L No 93-159, 87 Stat 627.

9. Sawchuk, supra note 8 at 1.

10. Sawchuk, supra note 8; Transportation Research Board, supra note 1.

11. Emergency Highway Energy Conservation Act, Pub L No 93-239, 87 Stat 1046.

12. "Nixon Approves Limit of 55 M.P.H.", The New York Times (January 3, 1974).

13. Richard Nixon, "Statement on Signing the Emergency Highway Energy Conservation Act" (January 2, 1974); Agent, Herd & Rizenbergs, supra note 14.

14. Energy Policy and Conservation Act of 1975 (EPCA), Pub L No 94-163, 89 Stat 871 (establishing the Corporate Average Fuel Economy (CAFE) standards, effective 1978).

15. Department of Finance Canada, Budget Speech (1979).

16. Sawchuk, supra note 8 at 16.

17. Electricity (Industrial and Commercial Use) (Control) (No 2) Order 1973 (SI 1973/2172) (UK).

18. Arthur E Graham, "Impact of the Fuel Shortage on Highway Funds in Indiana" (presented at the Purdue Road School, 1974) hereinafter Graham. .

19. Graham, supra note 22; Sawchuk, supra note 8.

20. Sawchuk, supra note 8 at 15–16.

21. Mark Holmgren, Kenneth L Casavant & Eric L Jessup, Evaluation of Fuel Usage Factors in Highway Construction in Oregon, FHWA-OR-RD-10-19 (Salem, OR: Oregon Department of Transportation, 2010) hereinafter “Holmgren, Casavant & Jessup”. .

22. Holmgren, Casavant & Jessup, supra note 29.

23. Holmgren, Casavant & Jessup, supra note 29.

24. Jonathan Skolnik, Price Indexing in Transportation Construction Contracts, NCHRP Project 20-07/Task 274 (Washington, DC: TRB, 2011).

25. Holmgren, Casavant & Jessup, supra note 29.

26. Ministère des Transports et de la Mobilité durable du Québec, « Mécanisme d'ajustement tarifaire du camionnage en vrac en fonction du prix du carburant » (dernière modification 2022) (Québec: MTMD).

27. Ibid.

28. Société québécoise des infrastructures, « Clause d'ajustement du prix des matériaux et équipements » (Québec: SQI).

29. Société québécoise des infrastructures, Guide d'utilisation du formulaire de calcul de l'ajustement du prix des matériaux et équipements visés, version 1.2 (Québec: SQI, septembre 2022).

30. Ministry of Transportation of Ontario, Ontario Provincial Standard Specification OPSS.PROV 100 — General Conditions of Contract (Rev November 2016), GC 8.02.04.02, "Payment Adjustment for Changes in the Fuel Price Index" hereinafter OPSS.PROV 100. .

31. OPSS.PROV 100, supra note 38.

32. Alberta Transportation and Economic Corridors, General Specifications and Specification Amendments for Highway and Bridge Construction, 16th ed (Edmonton: Alberta Transportation, January 2019), s 1.2.58, "Diesel Fuel Cost Adjustment," AMC_C230.

33. Government of Alberta, Transportation construction tendering and contracting: Unit prices and cost adjustments.

34. Government of Canada, Monthly average retail prices for gasoline and fuel oil, by geography (Table 18-10-0001-01).

35. British Columbia, Ministry of Transportation and Transit, "Fuel Price Adjustment — Hired Equipment Program" (last updated May 1, 2026) (Victoria: Ministry of Transportation and Transit).

36. Société québécoise des infrastructures, Guide d'utilisation du formulaire de calcul de l'ajustement du prix des matériaux et équipements visés, version 1.2, (Québec: SQI, septembre 2022).

37. CBC News, “4-day work weeks, rationing, dressing down: How some Asian countries are coping with the Iran oil crisis,” CBC, March 17, 2026.

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